The US economy adds 254,000 jobs in September, pushing markets higher as wage growth also exceeds forecasts
The US economy showed stronger-than-expected job growth in September, adding 254,000 nonfarm payrolls, according to a report from the US Department of Labor, as cited by CNBC.
This number significantly exceeded the Dow Jones forecast of 150,000 and the revised 159,000 jobs added in August. The unemployment rate edged lower to 4.1 percent, a 0.1 percentage point drop from the previous month.
With upward revisions to previous months' data, the US labour market appears healthier than earlier believed. August saw an additional 17,000 jobs, while July's figure was revised up by 55,000, bringing the monthly increase for July to 144,000.
These stronger numbers reduce concerns about the state of the labour market and are likely to encourage the Federal Reserve to adopt a more gradual pace in reducing interest rates.
Wage growth was also evident in the report, with average hourly earnings rising 0.4 percent for September and 4 percent year-over-year. Both numbers were higher than forecasts, which had predicted increases of 0.3 percent for the month and 3.8 percent over the year.
However, the average workweek dipped slightly to 34.2 hours, down 0.1 hour.
Kathy Jones, chief fixed income strategist at Charles Schwab, noted, “It was ‘wow’ across the board, much stronger than expected. The bottom line is it was a very good report. You get upward revisions, and it tells you the job market continues to be healthy, and that means the economy is healthy.”
Following the release of the data, stock market futures rose, and Treasury yields moved sharply higher, reflecting market confidence.
Job creation was most notable in the hospitality sector, where restaurants and bars added 69,000 jobs, a significant jump compared to the 14,000 average monthly increase over the past year.
The health care sector contributed 45,000 jobs, while government employment grew by 31,000. Social assistance added 27,000 jobs, and construction saw a 25,000 increase.
A broader measure of unemployment, which includes discouraged workers and part-time workers for economic reasons, dropped to 7.7 percent.
Meanwhile, the labour force participation rate held steady at 62.7 percent. The household employment survey, which calculates the unemployment rate, showed a gain of 430,000 jobs, with the employment-to-population ratio rising by 0.2 percentage points to 60.2 percent.
The report revealed that full-time employment saw a significant increase, with 414,000 more workers securing full-time positions, while part-time jobs decreased by 95,000.
In response, futures market pricing shifted, with traders now anticipating consecutive quarter-point interest rate cuts from the Federal Reserve in November and December.
Although the job market appears robust, there are still questions regarding how the Federal Reserve will handle future rate cuts. Earlier in the week, Federal Reserve Chair Jerome Powell described the labour market as “solid,” but acknowledged it had “clearly cooled” over the past year.
Powell also pointed out that there are few signs of an increase in layoffs, as unemployment claims have remained steady, though hiring has slowed. Additionally, the Federal Reserve’s Beige Book summary of business conditions indicates that companies are largely maintaining their headcounts.
Powell and other Federal Reserve officials have indicated a willingness to continue lowering interest rates following a half-percentage point cut in the overnight borrowing rate last month.
Powell expects the Fed to implement further rate cuts in quarter-point increments through the end of the year, though there is debate in financial markets over how quickly the central bank will act.
