WASHINGTON–Stronger-than-expected employment numbers for September just released by the Labor Department reveal a still-resilient economy that just adds to the dilemma facing the Federal Reserve, according to analysts.
Nonfarm payrolls increased by 336,000 for the month, much better than many had forecast and more than 100,000 higher than the previous month, the new Labor Department report shows. The unemployment rate was 3.8%, compared to the forecast for 3.7%.
Strong Headlines, But…
"The September employment report flashed a surprisingly strong headline figure, but the details were more subdued,” said NAFCU Vice President of Research and Chief Economist Curt Long. “Job growth zoomed past expectations at 336,000, but the household survey from which the unemployment figure is derived showed more modest growth. More importantly, wage growth sunk to its lowest level in 18 months. NAFCU still believes that the Fed is done hiking, but with the labor market showing no signs of immediate trouble, hopes for a rate cut in the near term are unfounded."
The data show average hourly earnings up 0.2% for September over the prior month and 4.2% from a year ago.
Growth by Sector
In terms of sector growth, the leisure and hospitality industry led with 96,000 new jobs, followed by government (73,000), health care (41,000) and professional, scientific and technical services (29,000).
Overall, the Labor Department reported service-related industries represented 234,000 of the new jobs, while goods-producing industries added just 29,000.
CUNA: Concerns Over Inflation 'Alleviated'
"The labor market had shown signs of moderation in the previous three months, with an average growth of 150,000 jobs per month after the downward revision of June and July hirings," said CUNA Senior Economist Dawit Kebede. "However, this report revised up July and August hirings by a combined 119,000. This puts the average job gains in the past three months at 266,000, which is stronger than previous reports indicate.
“Average hourly earnings increased by 0.2% in September, equivalent to an annualized growth rate of 2.4%. The increase in August was also similar. This is a modest growth rate despite stronger-than-expected hiring growth, which alleviates the concern of inflation pressures coming from wage growth.
“The strong hiring growth in this report, and the increase in vacancies released this week in the job openings and labor turnover survey, may make markets expect more hikes in the federal funds rate," Kebede continued. "However, wage growth consistent with the Federal Reserve’s inflation target of 2%, improved labor supply, and core-inflation on a downtrend should ease this expectation.”
Rate Cut Delay?
Some analysts expect the Fed will not be as quick to begin reducing rates as some had expected.
"Clearly it's moving up expectations that the Fed is not done," Liz Ann Sonders, chief investment strategist at Charles Schwab, told MSNBC. "All else equal, it probably moves the start point for rate cuts, which has been a moving target, to later in 2024."