The U.S. economy added 254,000 jobs in September, blowing way past economists’ estimates.
Stocks were moving higher on Friday morning after the U.S. Bureau of Labor Statistics released the September jobs report that blew past economists’ estimates.
The U.S. economy added some 254,000 new jobs in September, which was far better than the consensus estimates among analysts of 150,000 new jobs. It was also better than the 159,000 that were added in August.
The hiring surge brought the unemployment rate down to 4.1%. Economists had expected the unemployment rate to remain at 4.2%.
The markets rose sharply after the opening bell, with the S&P up 41 points, or 0.7%, while the Nasdaq surged 194 points, or 1.1%. The Dow Jones Industrial Average gained 273 points, or 0.7%, while the Russell 2000 climbed 31 points, or 1.4%.
Unemployment rate moves to 4.1%
The 254,000 new jobs created in September was higher than the average monthly gain of 203,000 over the previous 12 months.
The unemployment rate for adult men was 3.7 percent, down from 4.0% in August, while the jobless rate for adult women was 3.6 percent, down from 3.7% the previous month.
It also fell for most major demographic groups, dropping to 3.6%, from 3.8%, for White workers; falling to 5.7%, from 6.1%, for Black workers; and plunging to 5.1%, from 5.5%, for Hispanic workers. For Asian workers the unemployment rate stayed at 4.1%.
The labor force participation rate remained at 62.7% for the third straight month, while the employment population ratio ticked up to 60.2%, from 60.1% the previous month. And, as mentioned, the overall unemployment rate fell to 4.1%.
The areas that saw the biggest gains were food services and drinking places, which added 69,000 in September, well above the average monthly gain of 14,000 over the previous 12 months. The healthcare sector added 45,000 jobs in September, but that was below the average monthly gain of 57,000. Some 31,000 government jobs were added, which was also below the average monthly gain of 45,000 jobs. Further, the construction industry added 25,000 jobs, higher than the 19,000 12-month average.
Employment rates showed little change in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services.
Also, average hourly earnings for all employees increased by 13 cents, or 0.4 percent, to $35.36 in September. Over the past 12 months, average hourly earnings have risen by 4.0 percent. In addition, the average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.2 hours in September.
How will this impact interest rates?
The markets were all moving higher on Friday after the opening bell, but stocks settled down as the day wore on.
With inflation rates heading in the right direction, investors had turned their attention to the labor market, which had seen the unemployment rate going higher. This strong September report quelled a lot of fears that the economy was weakening.
“It was a very strong report,” Cooper Howard, director, fixed income strategy, at the Schwab Center for Financial Research, said. “This reduces the likelihood of a 50-basis point rate cut at the November Fed meeting. It’s only one report but it adds support to the view that the economy continues to hold up ok.”
However, another 50-point cut was unlikely even before the jobs report came out, as Fed Chair Jerome Powell indicated earlier this week, speaking at the National Association for Business Economics conference.
“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said, adding that the Fed is not on any preset course. However, he added that “if the economy performs as expected, that would mean two more rate cuts this year, a total of 50 [basis points] more.”
That suggests 25 basis points cuts at each of the next FOMC meetings in November and December.
