September’s nonfarm payrolls report defied estimates, with a massive beat in the headline number (and better-than-anticipated unemployment and hourly earnings) delivering much more than the moderate growth economists expected out of the third quarter’s final month.
The Labor Department reported Friday that nonfarm payrolls grew by 254,000 in September, easily topping economists’ expectations for 140,000. Figures for the past couple of months were revised higher, too. August’s payrolls tally was changed for the better, by 17,000 jobs to 159,000. July’s figure was significantly revised northward, too, by 55,000 jobs to 144,000.
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And September’s report marked the 45th consecutive month of payroll gains.
September’s unemployment rate of 4.1% was a tick lower than August’s 4.2%, and it also managed to best economists’ estimates (also 4.2%). Hourly earnings grew 0.4% month-over-month, also a touch higher than the 0.3% anticipated.
Here’s a brief look at the jobs report’s most pertinent details, which show a significant rebound from previous months.
- September payrolls: +254,000 (vs. +140,000 est.)
- September unemployment: 4.1% (vs. 4.2% est.)
- September hourly earnings: +0.3% (vs. +0.3% est.)
- August payrolls (revised): +159,000 (vs. +142,000 previously)
- July payrolls (revised): +144,000 (vs. +89,000 previously)
“This was a very encouraging payroll report, with job growth handily beating expectations and upward revisions taking the three-month average pace of payroll growth to a strong 186,000,” says Sonu Varghese, Global Macro Strategist at Carson Group. “The fact that inflation is easing at the same time means productivity growth is strong, and that should keep the Fed on track for more rate cuts—an added tailwind for the economy and markets.”
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Digging deeper into the September jobs report …
The economy saw major gains in a number of categories. Food services and drinking places’ payrolls improved by 69,000, trouncing the 12-month average of 14,000. Governmental payrolls improved by 31,000, health care added 45,000 jobs, social assistance employment grew by 27,000 jobs, and construction employment payrolls were up by 25,000.
A few industries saw jobs pared, but not by much. Temporary help services were hardest-hit, down by 13,800 jobs, continuing a monthslong streak of declines. Transportation and warehousing payrolls were off by 8,600, and manufacturing jobs were lower by 7,000.
Soft Landing Hopes Are High
The robust September payrolls report was seen by some strategists and analysts as a sign that the Federal Reserve’s 50-basis-point rate cut in September is turning away recent economic sluggishness, delivering the “soft landing” experts have anticipated for months.
“While the job market is still growing, a slowdown in growth has had a ripple effect amongst American consumers,” says Steve Rick, Chief Economist at TruStage (Formerly CUNA Mutual Group). “We are seeing that other areas of the economy are taking a toll as a result of the weaker-than-expected August report. According to The Conference Board, the major driver in this drop is worker’s negative experiences and high expectations for the labor market being met with disappointment. September’s report has left us hopeful that cutting interest rates will support stabilization in the unemployment rate and consumer confidence levels.”
“With stronger-than-expected data from this month’s Jobs report, the GDP rate hovering at 3%, and jobless claims at their lowest in months, we have arrived at the soft landing the American economy has been hoping for,” says Eric Roberts, Executive Director and Chief Executive Officer USA at global asset manager Fiera Capital.
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The jobs report also seemed to dampen any thoughts that the Fed might announce a second 50-basis-point rate cut at next month’s Federal Open Market Committee meeting, slated for Nov. 6-7. On Thursday, the CME FedWatch Tool showed that trading in federal-funds futures was pricing in a 36.8% chance of a 50-point cut; shortly after the release of September’s jobs report, that number had dropped to 0%. Instead, it projected a 99.1% chance of a 25-point cut, and a 0.9% chance that the rate would stay put in November.
“Two weeks ago, the Fed cut rates for the first time in over four years, but today’s jobs report was crucial in helping to define the scope of this cutting cycle,” says Lara Castleton, US Head of Portfolio Construction and Strategy (PCS) at Janus Henderson Investors. “This blowout jobs print will lend credence to the soft landing pundits that the reason behind the cuts was to normalize rates to an appropriate level for today’s economy. This print, in fact, was so much stronger than anyone expected and should reduce calls for the more dramatic 50 bps cut in November.”
More Expert Reactions to September’s Jobs Report
Here’s what strategists, financial managers, and other experts had to say about the September employment situation:
Joe Gaffoglio, President and CEO, Mutual Of America Capital Management
“The jobs report for September underscores an economy that is generally strong overall, as unemployment remains relatively low, while inflation moves towards the Federal Reserve’s 2% goal. The markets responded well to the Fed’s half-percentage point interest-rate cut in September, and the Fed has signaled that more cuts are coming, although the pace of easing will be driven by the direction of the labor market and how quickly inflation moves towards the Fed’s goal.
“Wages continue to grow, though more moderately, which is still positive news for workers and consumers. In August, average hourly earnings increased by 3.8% compared to August 2023. However, lingering inflationary pressures continue to impact consumers, squeezing purchasing power amid a higher cost of living. We will continue to monitor this trend, along with a narrowing gap between job openings and available workers, to uncover changes in consumer spending and saving.”
Jack McIntyre, Portfolio Manager, Brandywine Global
“Going forward, the strong jobs number demands a repricing of Fed rate cut expectations—by both the market and by the Fed. Last month’s 50bps rate cut was an exception, meant to be only a ‘catch up’ and not the start of a new trend. To continue to cut rates, the Fed will have to send a clearer message around what’s more important for its future monetary policy decisions—inflation or employment? Up to now, it has been sending mixed signals. As it turns out, the September employment data wasn’t a noisy report and confirmed the signal that the weekly jobless claims have been sending.
“This strong data gives the economic advantage to the Harris campaign. Attention can now shift to the upcoming election, which will start being the No. 1 influencer on markets.”
Jeff Schulze, Head of Economic and Market Strategy, ClearBridge Investments
“One fly in the ointment is the pickup in average hourly earnings along with a positive revision to last month’s figure. Hotter wage gains bear monitoring but given continued progression on the inflation front recently, and wages still running at a pace consistent with the achievement of the Fed’s 2% inflation target on a year-over-year basis, we don’t see this altering the near term path for 25 bps cuts at each of the next two FOMC meetings just yet.
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“This reading should put upward pressure on bond yields, creating a near-term headwind to equity valuations as the aggressive cutting path priced into interest rate futures gets reset. However, this release should be positive over the intermediate-term for risk assets generally and U.S. equities in particular as economic growth expectations should improve on the back of today’s release.”
Michelle Cluver, Head of ETF Model Portfolios, Global X
“The unemployment rate has been described as the single most important datapoint for the Federal Reserve’s likely trajectory. Coming in slightly better than expected, the unemployment rate decreased from 4.2% to 4.1%. The underlying resilience of today’s reading increases the probability of only a 25-bps cut at the November FOMC meeting. However, this may shift based on the October data.
“We remain in an environment where good economic news is good news for the equity market as it increases the potential for a soft landing. 10-year Treasury yields rose during the week as the JOLTS and ADP job reports came in stronger than expected. But the strength of this reading has pushed 10-year Treasury yields significantly higher.”
Lindsay Rosner, Head of Multi-Sector Investing, Goldman Sachs Asset Management
“Today’s data hit a grand slam with payrolls coming in strong, positive revisions, and unemployment falling. The economy is heading into the postseason solidly. This is a beat on every aspect and the Fed must be smiling as they got their bats out! This is a credit positive as the fundamentals of this economy are on strong footing.”
Jason Pride, Chief of Investment Strategy & Research, Glenmede
“A couple of early October developments such as Hurricane Helene and the port strikes could be factors that influence next month’s jobs report (though the suspension of those strikes may prevent the latter from having a material effect). It’s common after major hurricanes to see initial jobless claims rise in the weeks immediately thereafter, which should give some insight to the economic impact of Helene. However, those impacts tend to be relatively transitory and are ultimately factors that investors should see through.”
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