The Labor Department reported Friday that the U.S. economy added significantly more jobs than expected in September, pointing to a vibrant employment picture as the unemployment rate fell slightly.
Nonfarm payrolls rose 254,000 this month, up from a revised 159,000 in August and better than the Dow Jones consensus forecast of 150,000. The unemployment rate fell by 0.1 percentage points to 4.1%.
With upward revisions from previous months, the report eases concerns about the state of the labor market and the Federal Reserve's likely determination of a slower rate cut. The August total was revised upward by 17,000, while July saw a much larger gain of 55,000, bringing the monthly gain to 144,000.
Strong job creation impacted wages, as average hourly wages rose 0.4% month-over-month and increased 4% year-over-year. Both figures were above respective estimates for increases of 0.3% and 3.8%. The average weekly working time fell by 0.1 hour to 34.2 hours.
“It was a 'wow' across the board, much stronger than expected,” Kathy Jones, chief fixed income strategist at Charles Schwab, said of the report. “The bottom line is that it was a very good report. You get upward revisions and that shows the labor market continues to be healthy, and that means the economy is healthy.”
Stock market futures added to gains after the report, while Treasury yields rose sharply.
Restaurants and bars led the way in job creation this month, with the hospitality sector adding 69,000 jobs in September after an average of just 14,000 in the previous 12 months.
Health care, a consistent leader in job growth, contributed 45,000, while government grew by 31,000. Other winners included social welfare (27,000) and construction (25,000).
A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons fell to 7.7%. The proportion of the workforce that is employed or looking for work, the so-called labor force participation rate, remained constant at 62.7%.
The household employment survey, which is used to calculate the unemployment rate, showed an even better picture: it recorded an increase of 430,000 people as the employment rate as a share of the population rose to 60.2%, an increase of 0.2 percentage points .
Job creation was heavily concentrated in full-time positions, which increased by 414,000, while those reporting part-time work decreased by 95,000.
Following the report, prices in the futures market moved sharply, and traders now see a strong chance of back-to-back interest rate cuts of a quarter of a percentage point by the Federal Reserve in November and December.
The report raises questions about the strength of the labor market and how that will affect the Fed's approach to cutting interest rates.
Earlier this week, Fed Chairman Jerome Powell called the labor market situation “solid” but said it had “cooled significantly” over the past year.
There was little sign of layoffs accelerating as new jobless claims remained stable but hiring rates fell. Business surveys, including the Fed's Beige Book summary of business conditions, suggest that corporate headcounts remain relatively stable.
Powell and other Fed officials have indicated their willingness to cut interest rates further after cutting overnight lending levels by half a percentage point last month. However, there is considerable debate in the market about how quickly the central bank will act, and Powell said on Monday he expects the Fed to move in quarter-point increments at least through the end of the year.
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