In September, payrolls increased by 336,000, confounding fears of a hiring downturn.
In September, job growth was greater than projected, indicating that the US economy is holding up despite increased interest rates, labor unrest, and instability in Washington.
Nonfarm payrolls grew by 336,000 for the month, above the Dow Jones consensus forecast of 170,000 and exceeding the previous month by more than 100,000, the Labor Department reported Friday in a much-anticipated report. The unemployment rate was 3.8%, which was higher than the 3.7% predicted.
Following the revelation, stock market futures fell dramatically, while Treasury rates rose. The Dow Jones Industrial Average began lower, down about 150 points in early trade. The 10-year Treasury yield increased by 0.11 percentage point to 4.83%, close to its highest level since the early days of the financial crisis.
The payrolls rise was the most since January.
“Slowdown? What kind of slowdown? “The U.S. labor market continues to show incredible strength, with nearly twice as many new jobs created last month as expected,” said George Mateyo, chief investment officer at Key Private Bank.
Investors are concerned that a strong economy would compel the Federal Reserve to maintain interest rates high, maybe even raising them further if inflation continues high.
Wage growth, on the other hand, was lower than predicted, with average hourly earnings increasing 0.2% for the month and 4.2% year on year, compared to predictions of 0.3% and 4.3%, respectively.
Traders in the fed funds futures market, however, upped the odds of a rate hike before the end of the year to around 44%, according to the CME Group’s tracker.
“Clearly, it’s raising expectations that the Fed isn’t done,” Liz Ann Sonders, chief financial strategist at Charles Schwab, said. “All else equal, it probably moves the start point for rate cuts, which has been a moving target, to later in 2024.”
Sonders stated that the bond market is “in the driver’s seat” in terms of stocks, a trend that increased earlier this week when the Labor Department announced an increase in job postings for August.
Leisure and hospitality lead the industry with 96,000 new employment. Government (73,000), health care (41,000), and professional, scientific, and technological services (29,000) were also gainers. Jobs in the motion picture and sound recording industries declined by 5,000, bringing the total number of employment losses in Hollywood to 45,000 since May.
Service-related businesses gained 234,000 jobs to the overall job increase, while manufacturing added just 29,000. Average hourly wages in the leisure and hospitality business were unchanged month over month, but up 4.7% year over year.
The 263,000 increase in private sector payrolls was significantly ahead of the 89,000 increase reported earlier this week by ADP.
In addition to a strong September, the prior two months had significant upward revisions. August’s gain is now 227,000, up 40,000 from the previous estimate, while July’s gain increased to 236,000 from 157,000. The two months combined were 119,000 greater than previously reported.
The household survey, which is used to determine the jobless rate, rose 215,000.
The labor force participation rate, or the proportion of the workforce that works, remained stable at 62.8%, a half percentage point lower than the pre-Covid pandemic level. The rate for individuals aged 25 to 54 remained constant at 83.5%. A broader measure of unemployment, which includes discouraged employees and those working part-time for economic reasons, fell to 7%.
The September report comes at a critical juncture in the economy and markets.
Treasury rates have risen and equities have fallen amid fears that a still-hot economy will keep the Federal Reserve’s policy tight. Since March 2022, the central bank has hiked interest rates by 5.25 percentage points in an attempt to contain inflation, which is still running well above the Fed’s 2% objective.
According to a new report, the Latino economic production in the United States has increased to $3.2 trillion.
Several authorities have recently stated that they are still concerned about inflation. They have mostly stressed that, while another rate rise before the end of the year is possible, rates are almost expected to remain elevated for “some time.”
Though market pricing implies that the Fed will not hike again, the higher-for-longer story has caused investors concern. Higher interest rates boost the cost of capital and contradict the cheap monetary policy that has sustained Wall Street’s success for the majority of the last 14 years.
A healthy labor market is critical to the interest rate equation.
Policymakers believe that a tight labor market will continue to exert upward pressure on wages, causing prices to rise. Wages, according to Fed officials, did not play a part in the first inflation increase in 2021-22, but have since become more of a factor.