The United States had a significant increase in employment in September, which may prompt the Federal Reserve to consider hiking interest rates despite slowing wage growth.
This unexpected surge in nonfarm payrolls, along with revisions to July and August data from the Labor Department's latest jobs report, has heightened expectations for a third-quarter acceleration in economic activity.
After a year and a half of gradually raising interest rates to manage demand, the current state of the labor market and overall economic stability suggests that monetary policy will likely remain restrictive for an extended period. This report emerged against the backdrop of a surge in job openings in August and consistently low jobless claims in September.
Financial markets and a majority of economists are of the opinion that the Federal Reserve may have put a halt to its rate hikes due to long-term Treasury yields hitting their highest point in 16 years.
The nonfarm payrolls increased by 336,000 in September, marking the most substantial rise since January. Aside from that, the economy had created an additional 119,000 jobs in July and August compared to initial reports.
The leisure and hospitality sector played a pivotal role in driving job growth, contributing 96,000 new positions. Restaurants and bars were particularly active in this surge, with 61,000 new jobs added, effectively restoring employment in the sector to pre-pandemic levels.
Public sector employment saw a boost of 73,000 jobs, primarily fueled by growth in the education sector within state and local government agencies. That being said, public sector employment still lags behind pre-pandemic levels by 9,000 jobs. The healthcare sector contributed 41,000 jobs, encompassing roles in ambulatory health services, hospitals, nursing, and residential care facilities.
The unemployment rate has held steady, and wage growth has eased to 0.2% following a similar uptick in August. This has resulted in an annual wage growth rate of 4.2%, the lowest it has been since June 2021, down from 4.3% in August.
This decline in wage growth can be attributed to the majority of new jobs being generated in low-wage industries.
Wage growth, meanwhile, continues to outpace the Federal Reserve's 2% inflation target, emphasizing the need to keep a close eye on future economic developments.
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