The September US jobs report defies easy categorization, creating an ambiguous economic tableau. Compared to a consensus forecast of 50,000, Nonfarm Payrolls (NFP) in September rocketed by 119,000. There was a catch to this encouraging news. The unemployment rate edged up and past employment numbers were revised down significantly. This changes the importance of the upcoming, delayed, October jobs report. It will have an immediate impact on the Federal Reserve’s policy-making, especially as they look ahead to their December meeting.
The September labour report showed that despite NFP coming in above expectations, last month’s numbers were revised lower. That’s a revision downward from the original August figure, which had reported a gain of 22,000 jobs. Yet, it has been subsequently revised to reflect a drop of 4,000 jobs. This downward revision calls into question the trend in job growth overall, even with the rosy NFP numbers.
The unemployment rate ticked up to 4.4%, above the forecast of 4.3%. However, hidden behind this rosy picture is the stark reality that the labor market is still facing severe challenges. That means even with more jobs being created, more people are joining or rejoining the workforce. Such dynamics can worsen economic condition and stifle growth estimates.
For context on wage growth, average hourly earnings were up 0.2% month-over-month, below the expected 0.3% increase. This puzzling figure could point to a softening in wage inflation. Wage inflation is an important aspect to consumer spending and thus to the general health of the economy. Moreover, average weekly hours did not budge, holding steady at 34.2, which means employed people aren’t suddenly working a huge number of new hours.
On a yearly basis, wages are up 3.8%, slightly ahead of the consensus forecast of 3.7%. Overall, this year-over-year increase illustrates the positive trend occurring in wage growth. It’s not accelerating as fast as some in the analysis expected. The mixed results from this report echo the confusion and nuance of the present economic climate.
This labor report is vital, as well as timely. It is one of the last data points the Federal Reserve can look at before its December meeting. Markets are still assessing what these numbers will mean for the future course of monetary policy. In fact, they now predict only a 39% likelihood of a rate cut coming by December. Just a week ago, this probability was approximately 50%, reflecting a shifting sentiment among investors and analysts regarding future interest rate decisions.