The U.S. economy created 336,000 new jobs in September, reversing the cooling trend that was seen over the summer months, according to new data from the Bureau of Labor Statistics (BLS). This was also an increase from the upwardly revised 227,000 in August and higher than the consensus estimate of 170,000.
After seven months of downward employment revisions, the BLS adjusted payrolls for July and August higher by 79,000 and 40,000, respectively.
The unemployment rate was unchanged at 3.8 percent, compared to the market forecast of 3.7 percent. The labor force participation rate also was flat, at 62.8 percent.
“The good news for the #economy from this jobs report will be seen by many as constituting bad news for markets and monetary policy,” top economist Mohamed El-Erian wrote on X, formerly known as Twitter. “Given how often the #FederalReserve has stressed that it is ‘data dependent,’ this will put a hike back on the table for markets on November 1.”
Many monetary policymakers contend that the central bank might need to pull the trigger on another rate increase or keep interest rates higher for longer to achieve the institution’s 2 percent target inflation goal.
“Inflation continues to be too high, and I expect it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal in a timely way,” Fed Gov. Michelle Bowman said in a speech at a business conference in Alberta, Canada, on Oct. 2.
Most of the job gains were in three sectors: leisure and hospitality (96,000), government (73,000), and health care (41,000). Social assistance added 25,000 positions, and manufacturing payrolls grew by 17,000.
Employment in various sectors, such as transportation and warehousing, information, mining, and construction, was little changed.
Although the headline figure will receive the most attention from policymakers and investors, some economists believe the underlying data imply stagnation. As in prior months, many of the new jobs were concentrated in sectors such as leisure and hospitality and in the public sector. The monthly jobs report implies that the rest of the economy is growing slowly.
Additionally, the annualized average hourly earnings slipped to 4.2 percent from 4.3 percent, according to the BLS report. On a month-over-month basis, average hourly earnings edged up 0.2 percent, unchanged from the previous month.
The number of people employed part-time for economic reasons was unchanged at 4.1 million. The number of people not in the labor force but wanting a job was flat at 5.5 million. The number of workers with two or more jobs inched slightly higher, to 8.151 million.
‘Bidenomics’ and Jobs
President Joe Biden touted the September jobs report as evidence that “Bidenomics” is working.“It’s no accident. It’s Bidenomics,” he said. “We’re growing the economy from the middle out and the bottom up, not the top down.”
When asked by reporters at the White House why public sentiment regarding the economy isn’t positive, President Biden cited negative reporting and concern about Russia.
“I think they know they’re better off financially than they were before. It’s a fact,” President Biden told the press.
A treasure trove of polls suggests that the public feels discontent over the economy.
The current administration insists the economy is performing better than many expected and that it will take a while for the public to feel the effects of the White House’s legislative accomplishments.
The Effect on Fed Policy
Stocks rallied on Oct. 6 on the U.S. jobs data and a pop in Treasury yields.The Dow Jones Industrial Average jumped 288.01 points, or 0.87 percent, to close at 33,407.58. The S&P 500 added 1.18 percent to 4,308.50, while the tech-heavy Nasdaq Composite rose 1.60 percent to close at 13,431.34.
The U.S. Dollar Index, a gauge of the greenback against a basket of currencies, rose by as much as 0.4 percent to head toward the crucial 107.00 mark.
Treasury yields soared across the board. The benchmark 10-year yield surged by 12 basis points, to nearly 4.84 percent, before easing back a bit. Meanwhile, the 30-year bond rate surged past 5%.
U.S. bonds popped last week after better-than-expected labor data, suggesting it would give the Federal Reserve more room to tighten monetary policy and raise interest rates.
The 2-, 10-, and 30-year Treasury yields hit their highest levels in 16 years earlier last week before experiencing a modest pullback. However, the robust September jobs report allowed the yields to return to their best levels since 2007.
According to the Federal Reserve’s latest Summary of Economic Projections (SEP), officials see the median policy rate at 5.6 percent, meaning that the Fed’s policy-making arm, the Federal Open Market Committee, would need to agree to one more rate increase at the November or December policy meetings. SEP data also trimmed the size of rate cuts late next year by 50 basis points, indicating that elevated rates would be here to stay.
A Week of Labor Data
Heading into the September jobs report, the U.S. labor market appeared to be doing better than what many economists had feared over the summer.The number of job openings climbed by 690,000, to 9.61 million in August, up from an upwardly revised 8.92 million in July. This also topped the consensus estimate of 8.8 million.
Layoffs by U.S.-based employers were much lower than market forecasts. According to a report by Challenger, Gray & Christmas Inc., firms announced plans to terminate 4,457 positions in September, down from 75,151 in the previous month. At the same time, employers announced intentions to add more than 590,000 positions, up from 380,00 in August.
Still, in the third quarter, employers announced 146,305 layoffs, up by 92 percent year over year. Year to date, businesses have planned about 604,000 job cuts, the highest January–September total since 2020, driven by technology (151,989) and retail (70,714).
“Employers are grappling with inflation, rate increases, labor issues, and consumer demand as we enter the fourth quarter,” Andrew Challenger, labor expert and senior vice president of Challenger, Gray & Christmas, said.
But the ADP’s monthly National Employment Report threw a curveball in the better-than-expected labor numbers as the private sector reportedly created 89,000 new jobs, down from 180,000 in the previous month and below the market forecast of 153,000.
“We are seeing a steepening decline in jobs this month. In addition, we are seeing a steady decline in wages in the past 12 months,” Nela Richardson, the chief economist at ADP, said.
