A Stunningly Strong Jobs Report

A Stunningly Strong Jobs Report

The U.S. economy added 336,000 jobs in September, stunningly strong gains that roughly doubled economists’ forecasts.

The blockbuster number, released Friday by the Bureau of Labor Statistics, reflects the continued — and somewhat surprising — resilience of the job market in the face of efforts by the Federal Reserve to cool the economy and rein in inflation.

In fact, September’s gains topped the average monthly increase of 267,000 over the prior 12 months. The new report marks 33 straight months of job gains, and the increases from July and August were revised higher by 119,000, providing further evidence that the labor market remains hot.

The unemployment rate held steady at 3.8%, and the labor force participation rate was also unchanged, at 62.8%.

Average hourly earnings also remained stable— up 0.2% in September, the same as the previous month. That may help ease the Fed’s concerns that a tight labor market could drive up wages and contribute to inflationary pressures. Over the past 12 months, average hourly earnings have risen 4.2%, a slightly faster pace than inflation, which stood at 3.7% as of August.

Employers were hiring across a range of sectors last month, but the strongest gains were in leisure and hospitality, which added 96,000 jobs to finally return to pre-pandemic levels. Government employment, meanwhile, rose by 73,000 and prior months’ estimates of government payrolls were raised by 131,000. Healthcare added 41,000 jobs.

President Joe Biden hailed the new data as an indication that his economic plan is working. In a speech from the White House, Biden noted that the economy has added 13.9 million jobs since he took office and the unemployment rate has been below 4% for 20 months in a row, which he said is the longest stretch in 50 years.

“We’re creating good jobs in communities all across the country — including in places that have been left behind for the last, in some cases, 20 years because the factories they used to work at for years and years shut down, leaving them with no options, no jobs in that community — all over the Midwest and all over the Northeast,” Biden said.

Why it matters: The report could provide Fed policymakers more reason to raise interest rates yet again, or to hold rates higher for longer. The 10-year Treasury yield topped 4.88% on Friday, reportedly the highest level since 2007, as investors digested the new data.

Those higher interest rates themselves also act as a drag on the economy in a way that could limit the Fed’s need to tighten. “The bond market is doing heavy lifting for the Fed now,” Diane Swonk, chief economist at KPMG , told Bloomberg News. “That said, the acceleration in growth justifies higher rates and hawks will remain concerned about backsliding on progress made on inflation as they meet in November.”

Other economic indicators will ultimately determine the Fed’s path. “While we’re sticking with our call for rates on hold, if today’s number is followed by hot inflation data the Fed may get pulled into another hike,” J.P.Morgan Chief U.S. Economist Michael Feroli said in a note to clients. “And if that happens the already-tenuous case for avoiding recession next year gets harder to make.”