The economy added 254,000 jobs in September, and the unemployment rate fell to 4.1%, the Bureau of Labor Statistics reported Friday.
Investors had expected roughly 148,000 new jobs and for the unemployment rate to hold steady at 4.2%.
The interpretation
“I would say this is a wow for the economy and a wow for Jerome Powell,” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. “It’s definitely a home-run report, and it’s certainly stronger than what the Fed was expecting.”
What it means … for Biden and Harris
The surprisingly strong job growth in September is good news for President Joe Biden, who is suffering from high disapproval ratings related to his handling of the economy, and for Vice President Kamala Harris. She and Democrats are running low on time to turn around voter perceptions of the party’s economic record before the election.
What it means for … the Fed
The Federal Reserve is likely to take the report as a sign that the economy still has momentum. That might lead it to slow its planned interest rate cuts.
The Fed cut its target interest rate last month by half a percentage point, a large rate cut by historical standards. Investors expect further rate cuts in the months ahead as the Fed tries to prevent a broader economic downturn. But signs that businesses are still adding jobs in large numbers will sway the central bank toward slower and smaller rate cuts.
The underlying reality
It is important not to read too much into any one jobs report. The payroll numbers bounce around from month to month and are revised in subsequent reports.
Instead, it is helpful to look at the trend. The three-month moving average of job gains rose in October to 186,000, above the rate needed to keep up with population growth.
Roughly 110,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.
Prime-age employment, relative to the overall population, is strong by historical standards.
Recession watch
The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It fell in September but has been creeping up over the past year.
Recessions entail a rising unemployment rate.
Friday’s data suggest that the United States has still triggered one major recession indicator — when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.
Industries to watch
The leisure and hospitality sector in the past few months has finally exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country.
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Construction employment has remained robust, even as the housing market has taken a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. That’s in part because of a huge backlog of the construction of multifamily housing over the past year. Economists will watch closely for any sign of slowing hiring in construction.
Unemployment rates by race and ethnicity
The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years. After drifting up in recent months, unemployment rates for all racial and ethnic groups dipped in September.
