The US Department of Labor released a report on Friday showing that the non-farm payroll employment increased by 254,000 in September, far exceeding Dow Jones’ prediction of 150,000. The unemployment rate stood at 4.1%, lower than the predicted 4.2%.
In addition to disclosing the employment data for September, the Labor Statistics Bureau of the Department of Labor also revised the non-farm payroll employment figures for July from 89,000 to 144,000 and for August from 142,000 to 159,000. This alleviated concerns about the labor market cooling too quickly and could potentially signal a more gradual pace of interest rate cuts by the Federal Reserve.
As a gauge of inflation, the average hourly earnings rose by 0.4% in September to $35.36, marking a 4% increase from the previous year. Both the month-on-month and year-on-year growth rates were higher than the expected 0.3% and 3.8%, respectively.
Looking at specific industries, the food and beverage sector led employment growth in September with an addition of 69,000 jobs. Other significant areas of growth included healthcare (45,000), government (31,000), social assistance (27,000), and construction (25,000).
Employment in industries such as mining, oil and gas extraction, manufacturing, transportation and warehousing, wholesale trade, and retail trade remained relatively unchanged in September.
Following the release of the report, the futures market experienced a sharp pricing shift, with traders now believing that there is a high likelihood of the Federal Reserve cutting interest rates by 25 basis points consecutively in November and December.
CNBC quoted Kathy Jones, Chief Fixed Income Strategist at Charles Schwab, as saying, “The overall performance of this report is ‘wow,’ much stronger than expected.”
“The most important fact is that this is a very good report. You have upward revisions (referring to the upward revisions made by the Department of Labor for July and August employment figures), indicating that the job market continues to remain healthy, which signifies economic health,” Jones said.
Influenced by this report, the US dollar index briefly touched 102.54 on Friday, the highest since August 16, while the euro dropped to 1.0965 against the US dollar, the lowest since August 15.
Federal Reserve Chairman Jerome Powell reiterated this week that protecting the labor market was part of the reason the Federal Reserve decided to initiate an easing cycle with a significant interest rate cut in September. Powell and his colleagues believe that it is not necessary to cool the economy further to achieve the goal of a 2% inflation rate.