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The U.S. economy added 254,000 jobs in September, much more than expected, demonstrating the resilience of the labor market as the Federal Reserve weighs how quickly to cut interest rates.
The Bureau of Labor Statistics figure was higher than the 140,000 expected by economists polled by Reuters and compared with an upwardly revised 159,000 job gain in August.
The unemployment rate fell to 4.1%, close to the three-year high of 4.3% in July.
The report suggests the Fed is on track to achieve a so-called soft landing for the U.S. economy, with the U.S. economy experiencing the worst inflation in a generation while maintaining solid growth and strong employment. I have overcome the times.
Last month, the Federal Reserve cut its benchmark interest rate by 0.5 percentage points to prevent a major deterioration in the labor market.
After Friday’s data release, futures investors backed off on expectations that the Fed would cut rates another 0.5% at its next policy meeting in November.
Futures markets had priced in a 94% probability that the rate cut would be smaller by a quarter of a point, compared to about 65% just before the statistics were released.
“These numbers are a bit of a game-changer,” said Josh Hart, senior U.S. economist at Vanguard. “If you look at the revisions, it changes the story about the underlying pace of job growth. . . . It’s very positive overall.”
Immediately after this data was released, US Treasury yields soared. The yield on two-year U.S. Treasuries, which is sensitive to interest rate expectations, rose 0.15 percentage points to 3.86%, the highest level in a month. Futures markets suggested the S&P 500 could open 0.9% higher.
The dollar gained 0.5% against a basket of rival currencies on the news. The stock is up more than 2% since last Friday, on track for its strongest week in more than two years.
“Markets like cuts, but they don’t like cuts when the reason is real weakness in the economy or concerns about recession,” Hart said. “If the underlying economy is strong, they will favor rate cuts and strengthen their soft-landing scenario.”
Job growth in Friday’s report was strongest across leisure and hospitality industries, particularly restaurants and bars. Employment in these categories increased by almost 70,000 people. Employment of health care workers increased by 45,000.
Employment in manufacturing and other industries, such as mining and oil, was unchanged during the month, as were the retail, transportation, and professional and business services sectors.
Average hourly wages increased by 0.4% in the same month, and by 4% on an annual basis.
After cutting interest rates by a steeper-than-usual half-point in September, U.S. central bank officials are planning further rate cuts in the coming months, with a focus on the health of the labor market. This rate cut left the Fed’s benchmark interest rate unchanged at 4.75% to 5%.
Federal Reserve Chairman Jerome Powell signaled this week that unless the economy worsens unexpectedly, the Fed will return to its usual quarter-point rate cut at its next meeting in November, right after the U.S. presidential election.
Officials are increasingly confident they can reduce price pressures to the Fed’s 2% target without triggering a recession. Layoffs have not yet increased, but some economists have warned that weaker demand in recent months could portend a surge in job losses.
New data on Tuesday showed that job openings unexpectedly rose to 8 million in August, but the job turnover rate for Americans fell to its lowest level since June 2020.
The unemployment rate is up significantly from a recent low of 3.4% last year, but economists say the rise is mainly due to an increase in the labor force.
Most Fed policymakers last month expected the U.S. unemployment rate to peak at 4.4% this year and next, with interest rates falling to 4.25% to 4.5% and 3.25% to 3.5%, respectively.
