(CTN News) – In September, the US job market grew by the most in eight months, giving the Federal Reserve ammunition to raise interest rates again.
In its closely watched employment report on Friday, the Labor Department reported a bigger-than-expected surge in nonfarm payrolls last month and sharply higher revisions to July and August US Jobs. That confirms the third-quarter economic activity accelerated.
It looks like monetary policy may remain tight for a while, 18 months after the US central bank started raising rates to cool demand. In September, first-time unemployment benefit applications stayed low and US Job openings jumped in August.
Yields on bonds
Since long-term US Treasury yields are at 16-year highs, most economists believe the Fed is done hiking rates.
There’s a new tightening of financial conditions that does some of the work for the Fed, so it’s not a done deal for the Fed to hike rates again,” said Kathy Bostjancic, chief economist at Nationwide.
Last month, nonfarm payrolls increased by 336,000, the most since January. The economy created 119,000 jobs in July and August. In a Reuters poll, economists expected 170,000 payroll gains. Keeping up with the growth in the working-age population will require about 100,000 new jobs each month.
A few economists argued that payrolls had been boosted by difficulties adjusting data for returning education workers, a notion dismissed by most since private payrolls increased by 263,000.
Chris Low, chief economist at FHN Financial in New York, said, “The surge in teachers hired in September cannot be compared to the strength in payrolls now stretching back to July.”
A total of 96,000 jobs were added to the payroll in the leisure and hospitality sector. The restaurant and bar sector created 61,000 jobs, returning employment to its pre-pandemic level.
Including education, state and local government employment increased by 73,000 jobs. There are 9,000 fewer government US Jobs than prior to the pandemic. Hospitals, nursing homes, and residential care facilities added 41,000 jobs to the healthcare sector.
Despite the decline in temporary help hiring, professional, scientific, and technical services employment grew. Despite mortgage rates at a 20-year high, employment in transportation and warehousing, retail, and construction rose.
The United Auto Workers’ (UAW) strike at General Motors, Ford Motor and Chrysler parent Stellantis, which began at the end of the week that the government surveyed businesses for the employment report, did not affect payrolls. There was an increase of 17,000 jobs in manufacturing.
A months-long Hollywood writers’ strike recently ended, costing the industry 7,000 US Jobs.
Stocks on Wall Street were up. Dollar fell against a basket of currencies. Bond yields on the benchmark 10-year note and 30-year bond hit 2007 levels, sending Treasury prices down.
“It feeds into the higher (rates) for longer story,” said Gina Bolvin, president of Bolvin Wealth Management.
Stable unemployment rate
Slowing wage growth could provide some comfort to policymakers eager to see the labour market ease. After a similar gain in August, hourly earnings rose 0.2%. From 4.3% in August, the increase in wages slowed to 4.2%.
It’s likely that wages moderated because most of the US Jobs added last month were low-paying.
However, wages are still rising faster than the Fed’s 2% inflation target. However, fewer people are quitting their US Jobs for greener pastures, which could moderate wage growth.
Rates are expected to stay the same at the Fed’s Oct. 31-Nov. 2 policy meeting, though the odds of a hike are increasing. Next week’s inflation data might help clarify things. The Fed raised its benchmark overnight rate by 525 basis points since March 2022.
Household employment rose modestly in September while more people entered the workforce, keeping the unemployment rate unchanged at 3.8%.
Despite that, 156,000 fewer people were working part-time.
The broader measure of unemployment, which includes people who are looking for work but have given up, dropped to 7.0% from 7.1% in August. Unemployment was also shorter for fewer people.
Growth US Jobs estimates for the third quarter are at 4.9% annualized, more than double what Fed officials regard as the non-inflationary rate of around 1.8%.
In spite of slower wage growth for most workers, the still-solid rate of hiring suggests that aggregate incomes from the labor market continue to grow at a decent clip, which should help consumers spend more,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.