In a surprising turn of events, the US economy added 336,000 jobs in September, exceeding economists' expectations and continuing a trend of positive surprises in the labor market since the pandemic.[0] The Bureau of Labor Statistics reported that the employment gains in July and August were also revised upward by a combined 119,000.[1] This robust job growth is a welcome sign for job seekers, but it poses challenges for the Federal Reserve, which has been raising interest rates to combat inflation. The strong labor market could put upward pressure on inflation, potentially necessitating further rate hikes.
The unemployment rate held steady at 3.8% in September, remaining at a level not seen since February 2022.[2] While the rate has inched up from earlier this year, it is still historically low. However, average hourly earnings rose by just 0.2%, below expectations, and annual wage growth of 4.2% fell short of the forecasted 4.3%.[3] These numbers indicate that there is no upward spiral in wages and inflation, aligning with the Federal Reserve's 2% inflation target.[4]
The leisure and hospitality sector saw significant job gains in September, adding 96,000 jobs alone.[5] Employment in food services and bars increased by 61,000, returning to pre-pandemic levels.[6] Other sectors that experienced job growth include healthcare and social assistance, with 66,000 new jobs, and retail, which added 20,000 workers.
While the strong job market is a positive development for job seekers, it presents a challenge for the Federal Reserve. The central bank has been increasing interest rates to control inflation, and a robust labor market can contribute to upward pressure on prices. The Fed has already raised rates to the highest level in more than 20 years, and there is speculation that they may raise rates again this year or keep them high for longer.[7]
The September jobs report has led to increased bets that the Federal Reserve will raise rates at its upcoming meetings. Traders are now pricing in a 28.7% chance of a rate hike at the Oct. 31-Nov. 1 meeting, up from 20.1% previously.[8] This indicates that the market believes the strong job growth could prompt the Fed to take further action.[9]
The job market gains in September were surprising to economists, who had predicted a slowdown. The revisions to previous months' figures also revealed stronger hiring than previously reported.[10] This could indicate that the labor market is continuing to accelerate rather than decelerate, complicating the Fed's efforts to control inflation.[1]
Despite the positive job growth, concerns about inflation remain. While inflation has dropped significantly from its peak last year, it is still above the Federal Reserve's 2% target.[11] The readings suggest that there is still room for improvement in terms of stabilizing prices.
Overall, the September jobs report paints a complex picture of the US economy. While job growth is strong, wage growth remains modest, and inflation is a concern. The Federal Reserve will need to carefully consider these factors as it weighs its next steps in monetary policy.
0. “Economy hits a plot twist as jobs report joins conflicting signals” The Hill, 6 Oct. 2023, https://thehill.com/homenews/4242306-economy-jobs-report-conflicting-signals/
1. “Good news is bad news as markets react to strong jobs report” Washington Examiner, 6 Oct. 2023, https://www.washingtonexaminer.com/policy/economy/good-news-bad-news-markets-react-strong-jobs-report
2. “US economy adds 336K jobs in September, blowing past expectations” Fox Business, 6 Oct. 2023, https://www.foxbusiness.com/economy/us-jobs-report-september-2023
3. “A jobs bonanza stirs fears the American economy is overheating” The Economist, 6 Oct. 2023, https://www.economist.com/finance-and-economics/2023/10/06/a-jobs-bonanza-stirs-fears-the-american-economy-is-overheating
4. “Why investors shouldn't sweat September's jobs blockbuster” Axios, 6 Oct. 2023, https://www.axios.com/2023/10/06/september-jobs-report-blockbuster
5. “The job market caught fire in September. Will it burn the economy?” The Boston Globe, 6 Oct. 2023, https://www.bostonglobe.com/2023/10/06/business/job-market-caught-fire-september-will-economy-get-burned/
6. “High US jobs growth fuels rate rise expectations” BBC.com, 6 Oct. 2023, https://www.bbc.com/news/business-67031927
7. “Strong job growth in U.S. will likely extend to Minnesota” Star Tribune, 6 Oct. 2023, https://www.startribune.com/strong-u-s-job-growth-will-likely-be-the-case-in-minnesota-too/600310321/
8. “Jobs growth surges past consensus in September; unemployment stays at 3.8% (NASDAQ:TLT)” Seeking Alpha, 6 Oct. 2023, https://seekingalpha.com/news/4018888-jobs-growth-surges-past-consensus-in-september-unemployment-stays-at-38
9. “WSJ's Timiraos: its a weird payroll report” ForexLive, 6 Oct. 2023, https://www.forexlive.com/news/wsjs-timiraos-its-a-weird-payroll-report-20231006/
10. “How to make sense of the country's stunningly strong job market” NPR, 6 Oct. 2023, https://www.npr.org/2023/10/06/1204179771/jobs-labor-market-employers-economy-inflation-interest-rates
11. “September Hiring Surge Shows The Job Market is Staying Hot Despite The Fed's Best Efforts” Investopedia, 6 Oct. 2023, https://www.investopedia.com/september-hiring-surge-shows-the-job-market-is-staying-hot-despite-the-feds-best-efforts-8348322
