US job growth accelerates in September; Wage inflation cooling down

  • Nonfarm payrolls increased by 336,000 in September
  • Unemployment rate unchanged at 3.8%
  • Average hourly earnings rose 0.2%; 4.2% increase year-on-year

WASHINGTON, Oct 6 (Reuters) – U.S. employment rose by the most in eight months in September as hiring broadly increased, pointing to persistent labor market strength that is prompting the Federal Reserve to keep interest rates down. Could give ammunition to raise again, even though wage growth is slowing.

A stronger-than-expected increase in nonfarm payrolls last month and a faster-than-expected increase in the July and August jobs numbers reported by the Labor Department in its closely watched employment report on Friday bolstered expectations that economic activity will pick up in the third quarter. Will accelerate.

The resilience of the labor market and the broader economy, 18 months after the US central bank began raising rates to dampen demand, suggests monetary policy may remain tight for some time. The report follows news this week that job vacancies increased in August and first-time applications for state unemployment benefits were down in September.

Financial markets and most economists believe the Fed will likely raise rates as long-term US Treasury yields hit a 16-year high.

Kathy Bostjancic said, “There is a renewed tightening of financial conditions with bond yields rising, the dollar strengthening and equity market volatility increasing, which leaves some work for the Fed to do, so the Fed is likely to raise rates again.” There is no final deal.” Chief Economist at Nationwide.

Nonfarm payrolls increased by 336,000 jobs last month, the largest increase since January. The economy created 119,000 more jobs in July and August than the year before. The payroll gain was nearly double the 170,000 forecast by economists in a Reuters poll. The economy needs to create about 100,000 jobs per month to keep up with the growth in the working-age population.

Some economists argued that the payroll increase was due to difficulties in adjusting the data to account for the return of education workers after the summer break, a notion most rejected as private payrolls increased by 263,000 jobs.

“The increase in the number of teachers hired in September no longer belies the strength in payrolls coming through July,” said Chris Low, chief economist at FHN Financial in New York, which was credited with the biggest improvement in payrolls in a long time. “

The broad increase in payrolls was led by the leisure and hospitality industry, which added 96,000 jobs. Restaurants and bars dominated with the creation of 61,000 positions, bringing employment in the sector back to pre-pandemic levels.

Excluding education, run by state government education and local government, government employment increased by 73,000 jobs. Government employment remains 9,000 jobs below its pre-pandemic level. The health care sector added 41,000 jobs, offset by ambulatory health services, hospitals, nursing and residential care facilities.

There were gains in employment in professional, scientific and technical services, although temporary help hiring continued to decline. Employment increased in retail and construction payrolls as well as in the transportation and storage industry, which mostly reflects homebuilding despite mortgage rates being at their highest level in more than 20 years.

Payrolls were not affected by a United Auto Workers (UAW) strike at General Motors (GM.N), Ford Motor (FN) and Chrysler parent Stellantis (STLAM.MI) that began over the weekend. The government surveyed businesses for the employment report. Manufacturing payrolls increased by 17,000 jobs.

The recently ended months-long strike by Hollywood writers reduced employment in the motion picture and sound recording industries by 7,000 jobs.

A sign hiring an employee is seen in the window of a business in Arlington, Virginia, US on April 7, 2023. Reuters/Elizabeth Frantz/File Photo Get licensing rights

Stocks were trading higher on Wall Street. The dollar was lower against a basket of currencies. US Treasury prices fell, with yields on the benchmark 10-year note and 30-year bond rising to levels last seen in 2007.

“This blockbuster report propels higher (rates) for the long story,” said Gina Bolvin, president of Bolvin Wealth Management Group in Boston.

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unemployment rate stable

Policymakers, eager to see labor market conditions ease, may take some solace from slow wage growth. Average hourly earnings rose 0.2%, following similar gains in August. This slowed annual wage growth to 4.2%, the smallest increase since June 2021, which stood at 4.3% in August.

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The softness in wages was likely because most of the jobs added last month were in low-wage industries.

Still, wages are still growing faster than the 3.5% pace that economists say is in line with the Fed’s 2% inflation target. But as fewer people leave their jobs in search of greener pastures, wage growth may slow, although recent heavy union contracts pose a risk.

Financial markets were leaning towards the Fed keeping rates unchanged between October 31-November. According to CME Group’s FedWatch tool, the likelihood of a hike at the 1st policy meeting is rising. Inflation data next week may provide more clarity. Starting March 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

The unemployment rate remained unchanged at an 18-month high of 3.8% in September as domestic employment rose modestly while more people entered the labor market.

But due to economic reasons, fewer people were working part-time, with the number falling by 156,000.

As a result, a broader measure of unemployment, which includes people who want to work but have given up looking and those who are working part-time because they cannot find full-time employment, fell to 7.0% from 7.1% in August. Went. Fewer people were also experiencing long-term unemployment.

Labor market strength is helping keep the economy afloat, with growth forecast for the third quarter amounting to a 4.9% annual pace, more than double the non-inflation rate of about 1.8% projected by Fed officials.

Sarah House said, “While the typical worker may experience a slower pace of wage growth, the still solid rate of hiring suggests that total income derived from the labor market continues to grow at a decent clip, which is reflected in the overall “Must support consumer spending.” , a senior economist at Wells Fargo in Charlotte, North Carolina.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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