US jobs report beats forecast
Newsflash: Hiring across the US accelerated last month, with many more jobs created than expected.
The US non-farm payroll rose by 254,000 in September, new data from the US Bureau of Labor Statistics shows.
That’s better than expected, and will be welcomed in the White House as a sign that the US economy is not weakening.
The BLS says:
Employment continued to trend up in food services and drinking places, health care, government, social assistance, and construction.
The US unemployment rate has fallen, to 4.1% from 4.2% the previous month.
August’s non-farm payroll has been revised up too, from +142,000 to +159,000.
Key events
September’s strong jobs report should calm fears about the state of the US jobs market, says Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin:
“September’s non-farm payroll report, particularly the fall in the unemployment rate, should remove any near-term concerns on the state of the US labour market.
The combination of strong job creation and wage growth (both nominal and adjusted for inflation) is supportive to US consumption. With inflation heading in the right direction and ongoing expansion in the US economy, this should increase confidence that a soft-landing is coming to realisation, barring any shock.
While low inflation will allow the Fed to keep cutting rates, this strong set of results should reduce the likelihood of another outsized rate cut by the Federal Reserve in November.”
The surging dollar has now dragged the pound down to a new three-week low of $1.3070.
The chances of the Federal Reserve making another jumbo cut to interest rates next month have collapsed.
According to CME Fedwatch, the odds of a half-point cut by the Fed in November are just 10%, down from over 30% before September’s strong jobs report was released.
A smaller, quarter-point cut is now 90% likely.
US jobs report beats forecasts: What the experts say
Neil Birrell, chief investment officer at Premier Miton Investors, says:
“That was quite some jump in US payrolls in September, almost off the scale relative to expectations, and earnings were up more than anticipated as well. This is without question a strong jobs report.
“US employment data has been the focal point for bond and equity markets for the last two months and that will continue to be the case as everyone tries to second guess Fed policy. As it stands, a 0.5% cut must now be off the cards at their next meeting, although we do have one more jobs report before then – guess what we’ll all be looking at!”
Richard Flynn, managing director at Charles Schwab UK, agrees that the jobs report is stronger than expected:
“Today’s jobs figures have exceeded expectations, indicating a high level of demand in the labour market, reversing a recent trend. At the last Fed meeting, Jerome Powell emphasised that the slowdown in job growth was the key factor behind the decision to kick off the easing cycle with a larger-than-normal rate cut. Powell indicated that the “balance of risks” to the US economy has shifted—implying that supporting the job market has taken precedence over fighting inflation.
Today’s jobs figures suggest the Fed’s action is working well to support its full-employment mandate. With high inflation largely in the rearview mirror, this could be less good news for markets, as it may slow the pace of future rate cuts.”
Seema Shah, chief global strategist at Principal Asset Management, says such a strong jobs report means the Fed can’t consider another large cut to interest rates at its next meeting:
“Did the Fed even need to cut rates in September, let alone cut by 50bps?
The monster upside surprise suggests that the labor market may actually be a picture of strength, not weakness, and it completely dismisses the idea that the Fed could even contemplate another 50bps cut in November.
As jobless claims, the Challenger survey, and the multitude of strong economic data have been suggesting, the U.S economy is still robust. And with Fed easing now underway, recession risk has collapsed. Markets will need to keep a closer eye on inflation as, now, there are policy risks on both sides of the economy.”
Wage growth across the US economy was also a little stronger than expected.
Today’s jobs report shows that average hourly earnings rose by 0.4% in September, after gaining 0.5% in August. Wages increased 4.0% year-on-year after climbing 3.9% in August.
Wall Street economists had expected a 0.3% monthly rise in hourly earnings, and a 3.8% annual increase.
Where were the 254,000 new jobs created last month?
The BLS reports that:
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Employment in food services and drinking places rose by 69,000 in September.
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Health care added 45,000 jobs in September
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Employment rose in home health care services (+13,000), hospitals (+12,000), and nursing and residential care facilities (+9,000).
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Employment in government rose by 31,000, by 16,000 in local government, and by 13,000 in state government.
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Employment in social assistance increased by 27,000, primarily in individual and family services (+21,000).
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Construction employment continued to trend up in September (+25,000)
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Nonresidential specialty trade contractors added 17,000 jobs.
Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services, the BLS adds.
At 254,000, the increase in total nonfarm payroll employment last month was higher than the average monthly gain of 203,000 over the previous year.
The BLS’s latest household survey has more details about the US labor market.
It shows that the unemployment rate for adult men decreased in September to 3.7%. The jobless rates for other groups were little changed.
The number of Americans who have been out of work for less than 5 weeks decreased by 322,000 to 2.1 million in September.
But the number of long-term unemployed (those jobless for 27 weeks or more) was little changed over the month at 1.6 million, up from 1.3 million a year earlier.
Dollar jumps after strong US jobs report
The dollar is soaring, after September’s jobs report smashed forecasts.
The dollar index has jumped by almost 0.6%, putting it on track for its biggest one-day jump in four months.
This is crushing the pound’s attempts to rally – sterling is now down 0.2% today at $1.31, cementing the chances that this week will be the pound’s worst in over a year.
US jobs report beats forecast
Newsflash: Hiring across the US accelerated last month, with many more jobs created than expected.
The US non-farm payroll rose by 254,000 in September, new data from the US Bureau of Labor Statistics shows.
That’s better than expected, and will be welcomed in the White House as a sign that the US economy is not weakening.
The BLS says:
Employment continued to trend up in food services and drinking places, health care, government, social assistance, and construction.
The US unemployment rate has fallen, to 4.1% from 4.2% the previous month.
August’s non-farm payroll has been revised up too, from +142,000 to +159,000.
There’s a wide range of forecasts for today’s non-farm payroll, points out Bloomberg’s Valerie Tytel:
NFP cons. 150k today, the range of forecasts is wide 70k-220k due to hard to predict seasonal adj. Revisions might also catch the markets eye – the number has been revised down every month this year except for one. One more NFP before Nov Fed, next week CPI and Fed minutes. pic.twitter.com/bkL0mMB2L0
— Valerie Tytel (@ValerieTytel) October 4, 2024
The countdown to the most crucial set of US data during October is nearly over, says Achilleas Georgolopoulos, investment analyst at brokerage XM.
At 12.30 GMT the non-farm payrolls figure is expected to show a 140k increase, with forecasts ranging from 70k to 220k. Both the unemployment rate and the average hourly earnings growth will probably remain unchanged at 4.2% and 3.8%, respectively.
Up to now, data prints have been mixed, with the ISM manufacturing survey disappointing but both the weekly jobless claims and the ISM services survey raising the probability of an upside surprise today. A stronger set of prints later today, especially if the non-payrolls figure surpasses the 200k level, could force the most dovish Fed members to tone down their rhetoric for the November 7 meeting.
Such an outcome could really dent the current sizeable 35% probability for a 50bps rate move in November and further boost the US dollar. It has been a rather strong week for the greenback on the back of the reduced Fed rate cut expectations and the developments in the Middle East, with the dollar index being on course for its best week since mid-March.
It’s nearly time for the final major piece of economic news of the week, the US non-farm payroll.
September’s NFP – due at 8.30am East Coast time or 1.30pm in the UK – will give an insight into the health of the US jobs market – crucial both for the upcoming presidential election, and the path of US interest rates.
Economists predict that around 140,000 new jobs were created in September, according to a Reuters poll.
That would be very slightly lower than August’s 142,000, when there was a hiring slowdown.
A surprisingly strong jobs report, or a jump in wage growth, might shake investors’ confidence that the US Federal Reserve will cut interest rates speedily this year.
Currently, a quarter-point cut in November is a 70% chance, according to CME Fedwatch, with a 30% possibility of a second half-point cut in a row.
Back in the construction sector, the merger of housebuilders Barratt and Redrow has been given the green light by competition authorities.
The Competition and Markets Authority has said it has decided to accept undertakings made by the two companies, so the merger will therefore not be referred for a phase 2 investigation.
The CMA had been concerned that a Barratt development in Whitchurch, Shropshire, was close to Redrow’s development in Nantwich, Cheshire, possibly creating a local competition issue.
David Thomas, CEO of Barratt says:
“Today is a significant milestone for Barratt Redrow, as we come together as one organisation. With this combination, we have created an exceptional housebuilder in terms of quality, service and sustainability, able to accelerate the delivery of the homes this country needs.
Together, we offer a broader range of homes and price points for our customers who we will continue to put at the heart of everything we do. Our focus now is on integrating our businesses as efficiently and effectively as we can to deliver the expected benefits of the Combination.
We will leverage the best of both companies to deliver significant benefits to our people, our customers and our supply chain partners, and ensuring that Barratt Redrow is set up to deliver long term value to all of its stakeholders.”.
