US economy adds 336,000 jobs in September, blowing past expectations
September jobs report shows US economy almost doubled forecasted prediction
September jobs report kills any idea Fed will cut rates: Kenny Polcari
SlateStone Wealth chief market strategist Kenny Polcari discusses how the robust September jobs report could impact the Fed's inflation battle on 'Varney & Co.'
U.S. job growth unexpectedly accelerated in September, evidence the labor market remains resilient even as it confronts high interest rates and stubborn inflation.
Employers added 336,000 jobs in September, the Labor Department said in its monthly payroll report released Friday, almost double the 170,000 jobs forecast by Refinitiv economists. It marked the best month for job creation since January. The unemployment rate, meanwhile, held steady at 3.8%.
"The huge upside surprise in the monthly jobs report blew any ideas about a cooling labor market out of the water," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. "Regardless of whether another hike occurs, investors are facing the prospect of a hawkish Fed and high interest rates for the foreseeable future."
The report also contained steep upward revisions to job growth earlier this summer. Gains for July and August were revised up by a total of 119,000 jobs to a respective 236,000 and 227,000, the government said, suggesting that the labor market is hotter than it previously appeared.
WORKERS NOW DEMANDING NEARLY $80K TO START NEW JOB
All of this may be of concern to the Federal Reserve, which has signaled it is closely watching the report for evidence the labor market is finally softening after more than a year of interest rate hikes. The surge in hiring — which threatens to keep inflation elevated — could provide the U.S. central bank fodder to approve another interest rate hike this year and hold rates at peak levels longer than previously expected.
The odds of a November rate hike jumped to 30% on Friday after the latest jobs data, up from 18% one week ago, according to the CME Group's FedWatch Tool, which tracks trading. Investors also raised their expectations of a December rate increase, with 45.2% of traders predicting another hike.
JOB OPENINGS UNEXPECTEDLY JUMP IN AUGUST
"The jump in employment, the extremely low level of unemployment claims, and the rise in job openings keep alive the possibility of the Fed raising rates one more time this year," said Nationwide chief economist Kathy Bostjancic. "Moreover, it underscores that they will be in no hurry to cut rates — higher rates for longer."
Stocks plummeted, and Treasury yields jumped following the report's release, with the Dow Jones Industrial Average sliding 191 points.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 44722.06 | -138.25 | -0.31% |
| I:COMP | NASDAQ COMPOSITE INDEX | 19060.475899 | -115.10 | -0.60% |
| SP500 | S&P 500 | 5998.74 | -22.89 | -0.38% |
Still, there was a silver lining in the report on the inflation front.
Average hourly earnings — a key measure of inflation — increased 0.2% for the month and remain up 4.2% from the same time one year ago. Both figures came in below estimates, a welcome sign for the Fed.
Job gains were broad-based last month, with the biggest gains in leisure and hospitality (96,000), government (73,000) and health care (40,900).
KEY FED INFLATION GAUGE ACCELERATED AGAIN IN AUGUST AS HIGH PRICES PERSIST
The labor market has remained historically tight over the past year, defying economists' expectations for a slowdown. Although economists say it is beginning to normalize after last year's blistering pace, it is nowhere near breaking.
Construction workers are seen on a job site in Miami on March 10, 2023. (Joe Raedle/Getty Images / Getty Images)
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A separate report released Wednesday showed that job openings unexpectedly jumped to 9.6 million at the end of August, reversing three straight months of declines. Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6 million. There are still roughly 1.5 jobs per unemployed American.
The data, combined with historically low jobless claims, point to a labor market that remains resilient despite growing headwinds.
"Given how hot the job market is and how resilient the consumer is, it appears that the rapid rise in interest rates that we’ve seen — 550 bps in a year and a half — still hasn’t dampened the economy," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.