Unemployment rate also drops
The US labor market saw a surge in job creation in September as nonfarm payrolls rose by 254,000, beating economists’ expectations and potentially lowering the chances of significant further interest rate cuts by the Federal Reserve this year.
The unemployment rate also dropped to 4.1%, down from 4.2% in August, according to a closely watched report from the Labor Department's Bureau of Labor Statistics released Friday.
September's job gains followed an upwardly revised increase of 159,000 in August. Economists polled by Reuters had predicted a more modest increase of 140,000 jobs for September.
The figures mark a clear sign of the labor market’s overall resilience in 2024 in the face of multiple challenges. Rising immigration is increasing the overall supply of workers while layoffs have remained low, helping to sustain strong consumer spending – a key driver of the economy.
In addition to the payroll growth, average hourly earnings saw a 0.4% rise in September, following a 0.5% increase in August. On an annual basis, wages grew 4.0%, slightly up from the 3.9% rise in the previous month.
While the unemployment rate's decline from its August level was notable, it remains higher than the 3.4% recorded in April 2023. The increase earlier this year was partly attributed to a rise in the 16-24 age group and temporary layoffs during the annual shutdown of automobile plants in July.
All eyes on the Fed after stronger-than-expected jobs report
The Federal Reserve's interest rate decisions have been a focal point in recent months, with policymakers signaling caution in the face of evolving economic conditions. In September, the Fed introduced its first rate cut since 2020, trimming rates by 50 basis points following a series of hikes that had seen interest rates spike since 2022.
Fed chair Jerome Powell has emphasized that while the labor market has softened somewhat, recent revisions to economic data reveal a stronger-than-expected performance in areas such as growth, income, savings, and corporate profits. Powell hinted earlier this week that the central bank may not be in a rush to implement further rate cuts, despite market speculation about additional reductions later this year.
Still, the labor market could face headwinds in the coming months – not least due to the delayed impact of Hurricane Helene, which caused widespread damage across the US Southeast and potentially weighed down on employment in the region.
Mortgage Bankers Association (MBA) senior vice president and chief economist Mike Fratantoni said the robust jobs figures for September suggested a “soft landing” for the economy was on the way – but also warned of the potential for an upsurge in inflation as a result.
While he noted that job gains were concentrated in specific industries such as food services, construction, government hiring and healthcare, interest rates climbed after the report’s release and MBA expects longer-term rates including mortgage rates to remain within a “relatively narrow” range in the coming year, although the association says they’re unlikely to rise much above 6%.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
