US economy adds 336,000 jobs in September, blowing past expectations

U.S. job growth unexpectedly accelerated in September, evidence the labor market remains resilient even as it confronts high interest rates and stubborn inflation.

Employers added 336,000 jobs in September, the Labor Department said in its monthly payroll report released Friday, almost double the 170,000 jobs forecast by Refinitiv economists. It marked the best month for job creation since January. The unemployment rate, meanwhile, held steady at 3.8%.

“The huge upside surprise in the monthly jobs report blew any ideas about a cooling labor market out of the water,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “Regardless of whether another hike occurs, investors are facing the prospect of a hawkish Fed and high interest rates for the foreseeable future.”

The report also contained steep upward revisions to job growth earlier this summer. Gains for July and August were revised up by a total of 119,000 jobs to a respective 236,000 and 227,000, the government said, suggesting that the labor market is hotter than it previously appeared.

WORKERS NOW DEMANDING NEARLY $80K TO START NEW JOB

All of this may be of concern to the Federal Reserve, which has signaled it is closely watching the report for evidence the labor market is finally softening after more than a year of interest rate hikes. The surge in hiring – which threatens to keep inflation elevated – could provide the U.S. central bank fodder to approve another interest rate hike this year and hold rates at peak levels longer than previously expected.

The odds of a November rate hike jumped to 30% on Friday after the latest jobs data, up from 18% one week ago, according to the CME Group’s FedWatch Tool, which tracks trading. Investors also raised their expectations of a December rate increase, with just 45.2% of traders predicting another hike. 

“The jump in employment, the extremely low level of unemployment claims, and the rise in job openings keep alive the possibility of the Fed raising rates one more time this year,” said Kathy Bostjancic, Nationwide chief economist. “Moreover, it underscores that they will be in no hurry to cut rates – higher rates for longer.” 

Stocks plummeted and Treasury yields jumped following the report’s release, with the Dow Jones Industrial Average sliding 191 points.

Still, there was a silver lining in the report on the inflation front. 

Average hourly earnings — a key measure of inflation — increased 0.2% for the month and remain up 4.2% from the same time one year ago. Both figures came in under estimates, a welcome sign for the Fed.

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