By the numbers
• Coming off a string of relatively weak jobs data for the summer months, the September jobs report was just what the doctor — or in this case the Fed — ordered. By virtually any measure, the September numbers broke the recent trend and provided reason for optimism in the underlying resiliency of the labor economy.
• The pace of job creation found some renewed momentum, with the 254,000 monthly addition to nonfarm payrolls representing the largest monthly gain since March.
• Further, upward revisions to the July and August totals tacked an additional 72,000 new jobs onto that total, signaling that the labor market didn’t lose as much momentum during the summer as previously believed.
• The strength of the gains pulled the unemployment rate back down to 4.1% — still well above the 3.4% low point in the current cycle but still indicative of a labor market that appear to be on a solid enough footing with room for further gains to come.
• Weekly hours worked edged fractionally lower, but average hourly wages increased by 0.4% in September, sufficient to nudge average weekly wages up slightly.
• Average hourly earnings rose by 4.0% over the past year — a solid gain made even more meaningful by the continued decline in inflation, which has made those pay gains go a little further in fueling consumer spending.
Broad thoughts
• The September jobs report was the first piece of the two-part inflation/employment puzzle that the Fed will be putting together in advance of its November policy meeting, with the September report on consumer inflation still on deck. It was also arguably the more important of the two given the increased Fed focus on the weakness in the labor market as inflation risks continue to recede.
• Barring any surprises in the coming weeks, the solid September jobs report positions the Fed well enough to shave its policy rate by a quarter point in November rather than feel compelled to stay on a more aggressive rate-cutting timetable. Policymakers must like what they’re seeing — steady disinflation and solid job creation — further evidence that monetary policy hasn’t fallen behind the curve.
• Certainly, job creation has slowed considerably over the past few years, but it needed to restore some balance to labor conditions. Even so, the better-than-expected September increase and revisions to prior monthly totals are consistent with solid payroll growth. The fact that the uptick in unemployment hasn’t been accompanied by any notable increase in the pace of layoffs to this point also seems to validate the Fed’s positioning and suggested near-term path.
• The combination of inflation that continues to retrace toward 2%, economic growth that still appears to be tracking above 2%, and a labor market that’s showing signs of relative stability bodes well for the Fed’s ability to ease gradually into a soft landing. It’s still not a guarantee, but it’s looking increasingly plausible.
The bottom line
• The September jobs report wasn’t only a welcome surprise on the heels of a few disappointing reports but provided reason for optimism for Fed policymakers, economists, and investors.
• The report doesn’t singlehandedly change the landscape for the economic outlook, but it does provide reassurance that there’s still plenty of life in the jobs market.
• Can job creation and labor conditions maintain solid momentum as the Fed gradually takes its foot off the brake? There’s very little in the September jobs report to suggest that it can’t.
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