Attendees at the Albany Job Fair in Latham, New York, USA, on Wednesday, October 2, 2024.
Angus Mordant | Bloomberg | Getty Images
Labor market conditions in September are expected to be broadly similar to those in August – a gradual slowdown in hiring since the start of the year, moderate wage growth and a labor market that looks largely as many policymakers had hoped.
According to the Dow Jones Consensus, nonfarm payrolls are expected to rise by 150,000, compared to 142,000 last month, with unemployment remaining steady at 4.2%. On the wages side, a monthly increase of 0.3% and a year-on-year increase of 3.8% are forecast – the annual rate is the same as in August.
If the numbers turn out as expected, they would come close to a sweet spot that would allow the Federal Reserve to cut interest rates further without feeling like it's falling behind the curve and risking triggering a recession.
“The labor market is slowing and becoming less tight,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “The balance of power has shifted back to employers and away from employees and this will certainly ease wage pressures, which have been a key component of inflation. We’ve been in a soft landing for some time, and that’s exactly what a soft landing looks like.”
Of course, there is always the possibility of a significant surprise up or down in the numbers. Add to that the sometimes dramatic monthly revisions that led the Labor Department to overcount new hires for the 12-month period ending March 2024 by more than 800,000, making the labor market analysis even more uncertain.
“Although we expect 150,000 new jobs, I wouldn't be surprised if it was 50,000 and I wouldn't be surprised if it was 250,000,” said David Kelly, chief global strategist at JPMorgan Asset Management. “I don’t think people should be too upset about that number.”
The Bureau of Labor Statistics will release the report at 8:30 a.m. While there will be another count of nonfarm payrolls before next month's presidential election, the October report is expected to be distorted by the longshoremen's strike and Hurricane Helene – making September the last “clean” report before Election Day .
Looking for clues
Still, markets will indeed be watching the report closely.
Specifically, they will be looking for clues as to whether the Fed will be able to ease monetary policy and gradually cut interest rates to match previous easing cycles, or whether it will have to repeat the dramatic half-percentage point rate cut implemented in September.
At the same meeting where they approved the cut, policymakers indicated that the cuts would be reduced by another half percentage point, or 50 basis points, before the end of 2024 and another full percentage point by 2025. However, markets are pricing in a more aggressive timeline.
“A strong number wouldn’t really change their position,” JPMorgan’s Kelly said. “A weak number could tempt them to add another 50 basis points.”
However, Kelly said the Fed would look at the employment situation as a “mosaic” rather than just a single data point.
The big picture
In recent months, labor market indicators have trended downward, but have not fallen by any stretch of the imagination. Surveys in the manufacturing and services sectors suggest slower hiring, while Fed Chairman Jerome Powell earlier this week described the labor market as solid but weak.
Aside from a brief dip at the start of the Covid-19 pandemic, the last time the monthly hiring rate reached this summer's level – 3.3% of the labor force in both June and August – was in October 2013, when the unemployment rate was 7.2% fraud. according to the Department of Labor.
The number of job vacancies has also declined and the ratio of available jobs to unemployed people has fallen to 1.1 to 1 from 2 to 1 a few years ago.
However, something of a standstill has descended on a labor market that not long ago was struggling with the “Great Resignation,” as workers confident they could find better deals elsewhere left their jobs en masse.
Ignoring pandemic-related fluctuations in 2020, the churn rate has not been below the current 1.9% since December 2014, while the separation rate, even taking Covid into account, was last below the current 3.1% in December 2012.
“Whatever leverage the work had, [it] “Sales have subsided or simply weakened as the economy normalized,” said Joseph Brusuelas, chief economist at tax consulting firm RSM. “So we will have a lot less sales.” We see it in our business. That’s what we hear from our customers.”
But if someone had told Brusuelas during the coronavirus upheaval four years ago that the economy would now be creating nearly 150,000 new jobs per month with unemployment in the low 4 percent range, he would have said, “I would have bought you a steak dinner .” .”
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