American employers added a robust 254,000 jobs in September, significantly easing worries about a weakening labour market and indicating that the rate of hiring remains strong enough to bolster a growing economy.
The increase in employment last month was much higher than economists had predicted, marking a significant rise from the 159,000 jobs added in August. Furthermore, after steadily increasing throughout most of 2024, the unemployment rate fell for the second consecutive month, dropping from 4.2% in August to 4.1% in September, according to data released by the Labor Department on Friday.
These latest figures suggest that many businesses remain confident enough to continue hiring, despite the ongoing burden of high interest rates. While few employers are making redundancies, many have become more cautious about recruitment.
In a positive development, the Labor Department also revised its job growth estimates for July and August upwards by a combined total of 72,000. Taking these revisions into account, along with September's job gain - which forecasters had estimated at around 140,000 - means that job growth has averaged a solid 186,000 over the past three months.
In contrast, the three-month average in August was only 140,000. "There’s still more momentum than we had given it credit for,’’ said Stephen Stanley, chief economist at banking firm Santander, commenting on the job market. "I would call it solid — certainly not as explosive as what we were seeing last year or the year before, when we were catching up from the pandemic. But the pace of job growth overall is very healthy.’’.
The job gains in September were quite diverse, a positive trend if it persists. Restaurants and bars created 69,000 jobs. Healthcare companies added 45,000, government agencies 31,000, social assistance employers 27,000 and construction companies 25,000.
A category encompassing professional and business services added 17,000 after three consecutive months of job losses. Average hourly wages also saw a solid increase. They rose by a higher-than-expected 0.4% from August, slightly less than the 0.5% gain the month before.
Compared to a year earlier, hourly wages climbed 4%, up slightly from a 3.9% year-on-year gain in August. The economy's success in controlling inflation led the Federal Reserve last month to cut its benchmark interest rate by a significant half-point, its first rate cut in over four years, and indicated that more cuts were likely in the coming months. The Fed stated its intention to lower borrowing costs to help strengthen the job market.
Given Friday’s strong jobs report, the Fed is now expected to reduce its key rate by more typical quarter-point increments. "The September jobs report shows a nice bump in labour demand at the beginning of the autumn," said Bill Adams, chief economist at Comerica Bank. "The U.S. economy is growing solidly in 2024 even as inflation slows to near the Fed’s target."
The economy's robustness has been a welcome surprise. Experts had braced for a , anticipating that the Fed's bold measures to tame inflation—hiking interest rates 11 times across 2022 and 2023—would take their toll.
But the economy continued to expand, even as borrowing costs soared for consumers and businesses alike. Most economists now believe the Fed may have pulled off the once-dubious feat of a "soft landing," where steep interest rates stamp out inflation without plunging the economy into recession.
As the November 5 presidential election draws closer, the state of the economy is front and centre in voters' minds. Despite the job market's resilience, many Americans remain unimpressed, still grappling with high prices which are, on average, 19% higher than they were back in February 2021.
That was the month when inflation began its sharp climb as the economy bounced back from the pandemic recession faster and stronger than expected, leading to acute shortages of goods and labour. This widespread dissatisfaction with inflation and the economic situation under President has become a political albatross for Vice President Kamala Harris as she vies for the presidency against former President .
The October jobs report, set to be released just four days before the election, is expected to be clouded by the aftermath of Hurricane Helene and a strike by Boeing machinists. Despite some economic uncertainty, the majority of indicators suggest a robust economy.
The US, the world's largest economy, experienced a strong 3% annual growth rate from April to June, fuelled by consumer spending and business investment. A forecasting tool from the Federal Reserve Bank of Atlanta indicates a slower but still healthy 2.5% annual growth in the July-September quarter just ended.
Last month saw an increase in household spending at retailers. Despite a slowdown in hiring, Americans are enjoying unusual job security with layoffs near a record low as a percentage of employment. Unemployment benefit claims also remain at historically low levels.
Companies appear hesitant to let workers go, even though some are reluctant to expand their payrolls. This unusual dynamic may be due to many employers being caught unprepared and understaffed when the economy began to recover from the pandemic recession.
Job openings have steadily declined to 8 million in August, after peaking at 12.2 million in March 2022. Workers have noticed a cooler environment for job seekers. Fewer feel confident enough to leave their jobs for better positions. The number of Americans quitting their jobs has reached its lowest level since August 2020, when the economy was still recovering from COVID.
Economists are predicting that the Fed will likely go for a modest quarter-point cut in its benchmark rate this November, following September's larger half-point reduction. The job market's resilience means the Fed won't have to slash borrowing costs too aggressively.
"The bottom does not appear to be falling out of the labor market," observed Jason Pride, Glenmede's chief of investment strategy. Following the release of Friday's jobs report, Wall Street traders ramped up their bets on a quarter-point cut at the Fed's next meeting to 93%, a significant jump from Thursday's 68%.
