U.S. employment rose significantly in September, with hiring across various sectors indicating a strong labor market. This could provide the Federal Reserve with the justification to raise interest rates, although wage growth is slowing. The latest employment report from the Labor Department, which revealed a larger-than-expected increase in nonfarm payrolls last month, along with upward revisions to July and August’s job counts, supports the belief that economic activity accelerated in the third quarter. The resilience of the labor market and the broader economy, even after 18 months of the Fed’s rate hikes, suggest that monetary policy may remain tight for some time. This report follows news that job openings surged in August and first-time applications for state unemployment benefits remained low in September. While financial markets and most economists believe the Fed is unlikely to raise rates further due to rising long-term U.S. Treasury yields, there is still a possibility given the current tightening of financial conditions. Nonfarm payrolls increased by 336,000 jobs in September, the largest rise since January. Additionally, July and August’s job numbers were revised upwards by 119,000. This surge in payrolls was led by the leisure and hospitality industry, with restaurants and bars accounting for a significant portion of the job gains. Government employment also increased, particularly in the education sector. The healthcare sector and professional services also saw job growth. However, temporary help hiring continued to decline. The transportation, retail, and construction industries also experienced employment gains. Manufacturing payrolls increased, although employment in the motion picture and sound recording industries decreased due to a recent strike. The unemployment rate remained steady at 3.8% in September, while the broader measure of unemployment, which includes people who want to work but have given up searching, decreased to 7.0%. Wage growth slowed, with average hourly earnings rising by 0.2% in September, lowering the annual increase to 4.2%. Although wage growth may moderate as fewer people quit their jobs, recent union contracts could pose a risk. Financial markets are leaning towards the Fed keeping rates unchanged at its upcoming policy meeting, but this could change depending on inflation data. Overall, the strength of the labor market is supporting the economy, with growth estimates for the third quarter exceeding expectations.
