The September Jobs Report: A Surprising Twist in the U.S. Job Market

Unemployment Remains Steady at 3.8% as Job Growth Defies Expectations

The U.S. job market is emphatically shrugging off predictions of a recession in the next few months. Employers stepped up hiring sharply in September, adding a booming 336,000 jobs despite high interest rates and inflation. That’s the strongest monthly gain since January. The unemployment rate held steady at 3.8%, the Labor Department said Friday. Economists had estimated that 170,000 jobs were added last month, according to a Bloomberg survey, extending a recent trend of slowing job growth.

A Bright Spot in the Labor Market

Instead, job gains for July and August were revised up by a combined 119,000, pushing the advances for each month over 200,000 and painting a more robust picture of summer hiring than previously thought. This surprising twist in the job market has left many wondering what lies ahead. Is the U.S. headed for a recession?

Navigating Through Uncertain Times

Stratta says he’s weary of longstanding forecasts of a recession that never seems to arrive. “We’ve actually stepped up hiring because the predictions of the last few years have not come to pass,” Stratta says. “We’re almost fatigued at the messaging.”

The Fed’s Dilemma: To Raise or Not to Raise?

While strong job gains are normally welcomed, the report likely raises the odds that the Federal Reserve will raise interest rates again next month to tamp down job and wage growth that could be fueling inflation, says economist Rubeela Farooqi of High Frequency Economics. A separate report this week showed that job openings jumped in August after trending lower in prior months. The Fed is nearing the end of an aggressive rate hike campaign but has said it would move again if the economy and inflation don’t show evidence of cooling on a sustained basis.

The Fed’s Tightrope Walk

Yet some economists say the Fed is probably done. The central bank is focused less on total job gains and more on the unemployment rate, which has risen notably in recent months as more people stream into a healthy labor market. The larger labor supply should allow wage growth and inflation to continue to drift lower, he says, because employers don’t need to compete as intensely to attract workers.

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Wall Street Reacts: Dow and 10-year Treasury

The Dow Jones industrial average reversed early losses sparked by concerns that the big job gain would mean another rate hike. Investors instead were encouraged that the moderation in wage growth could allow Fed officials to stand pat. The Dow was up 363 points in late-afternoon trading, and the S&P 500 index was up 1.37%. The 10-year Treasury bond rose 0.07 percentage point to 4.78%, similarly paring a larger rise earlier that was triggered by the anticipation of higher rates.

Watching the Financial Markets

How fast are wages growing? Average hourly earnings rose 7 cents to $33.88, nudging down the yearly increase to 4.2% from 4.3%. That should be positive news for the Fed, but it’s still too high as officials seek to lower annual pay increases to 3.5% to align with their 2% overall inflation target. Wage growth topped 5% last year amid severe COVID-related labor shortages.

Easiest Industries to Land a Job

In September, leisure and hospitality, which includes bars and restaurants, led the job gains with 96,000, resuming its previous strong hiring as it recovered from massive COVID-related job losses. In recent months, the sector had been recording weaker gains. Government added 73,000 jobs, partly reflecting the return of teachers. Health care added 41,000 jobs; professional and business services, 21,000; and retail, 20,000.

A Glimpse into Job Sectors

September had been shaping up as something of a wild card for employment growth. The return of school teachers and the departure of students from summer jobs made it challenging for officials to make their usual seasonal adjustments to the figures.

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The Uncertainty Looming Over Employment

Is the job market still strong? More broadly, average monthly payroll growth has slowed to a still sturdy 266,000 over the summer from more than 300,000 early this year now that the millions of jobs wiped out in the pandemic have been recovered. Forecasters, though, have been surprised the downshift hasn’t been sharper in light of the Federal Reserve’s 5.25 points of interest rate hikes since early 2022.

Gauging the Employment Pulse

In an interview, Acting Labor Secretary Julie Su said the job market is still cooling despite the blockbuster September and upward revisions for the summer months. She noted that monthly gains a year ago were averaging 423,000. “These numbers are a sign of steady, stable growth,” she said.

The Employment Landscape: Companies’ Strategies

The resilient labor market largely has been traced to companies’ reluctance to lay off employees following two years of pandemic-related labor shortages. Jobless claims, a gauge of layoffs, have stayed low.

To be sure, large companies have pulled back hiring and even cut workers, especially in technology, as borrowing costs have spiraled higher. But many small and midsized businesses that struggled to attract workers are snapping up those laid off and drawing from a more plentiful labor supply as Americans sidelined by COVID return to the workforce.

The Diverse Employment Scenarios

Dan Yates, CEO of Endeavor Bank in San Diego County, says the community bank wants to lure employees at large financial institutions “that may be interested in moving their talents to our growing bank.” Others, however, say rising interest rates are finally dampening sales, prompting them to scale back hiring. Higher borrowing costs have discouraged biotech and pharmaceutical companies from adding workers for research and development.

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As a result, job placements are down about 78% in the past year and Petras has slashed his recruiting staff from 11 employees to four, turning to less expensive overseas contractors to fill in gaps. “I’ve never seen it fall off a cliff like it did at the end of” the summer of 2022, Petras says.

The Road Ahead

For the labor market overall, a more dramatic slowdown probably lies ahead. Job gains have been revised down every month through the first half of the year – a streak that was broken by Friday’s upward revisions for July and August. That’s typically a harbinger of a significant weakening in hiring and a rise in layoffs, Ludtka says.

FAQs (Frequently Asked Questions)

  1. Is the U.S. headed for a recession?
    • The U.S. job market seems to be defying recession predictions with a strong jobs report.
  2. Will the Federal Reserve raise rates again?
    • The strong job gains may lead to the Federal Reserve raising interest rates to curb inflation.
  3. How fast are wages growing?
    • Average hourly earnings have increased, but the Fed is looking to lower annual pay increases to control inflation.
  4. What is the easiest industry to get a job in?
    • In September, the leisure and hospitality industry led job gains, followed by government, health care, professional services, and retail.
  5. Are companies laying people off now?
    • Large companies have scaled back hiring in some sectors, while small and mid-sized businesses are actively hiring.

This article discusses the surprising September jobs report in the U.S., where job growth remained strong despite concerns of a looming recession and its potential impact on the Federal Reserve’s decisions regarding interest rates. It also delves into wage growth, employment trends in different industries, and the resilience of the labor market, providing a comprehensive overview of the current job market situation.

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