The US non-farm payrolls increased by 254,000 in September, far exceeding expectations, with a drop in the unemployment rate and strong wage growth

On Friday, October 4th, the US Bureau of Labor Statistics released a report showing that US job growth in September far exceeded expectations, marking the largest increase since March this year. The unexpected drop in the unemployment rate, the year-on-year increase in wages, helped alleviate concerns about the deterioration of the US labor market.

In September, non-farm payrolls in the US increased by 254,000, far exceeding the expected 150,000 and all economists surveyed by the media. The data for August was revised up from 142,000 to 159,000, and the July employment data was revised even more significantly, up by 55,000 to 144,000, resulting in a total upward revision of 72,000 jobs for August and July combined.

September saw an increase of 223,000 jobs in the private sector, compared to an expected increase of 125,000, with the previous value for August showing an increase of 118,000. In September, manufacturing employment decreased by 7,000, compared to an expected decrease of 8,000, with the previous value for August showing a decrease of 24,000. The employment diffusion index, which measures the breadth of changes in private employment, rose to its highest level since the beginning of this year.

Looking at specific industries, restaurants and bars saw the most new job additions in September, with the hospitality industry adding 69,000 positions, compared to an average of only 14,000 new positions over the past 12 months. The healthcare industry, a consistent leader in job growth, added 45,000 positions. The government sector added 31,000 positions. Other industries with significant job additions include social assistance with 27,000 and construction with 25,000.

The US unemployment rate in September was 4.1%, lower than the expected 4.2%, with the previous value for August at 4.2%.

A more comprehensive measure of unemployment rate (including discouraged job seekers and those working part-time for economic reasons) fell to 7.7%, marking the first decline in nearly a year.

Job growth momentum remained strong, impacting wage levels as well, with both year-on-year and month-on-month wage growth rates exceeding expectations. In September, average hourly wages increased by 4% year-on-year, the highest since May, with an expected increase of 3.8% and the previous value at 3.8%. Average hourly wages in the US increased by 0.4% month-on-month in September, with an expected increase of 0.3% and the previous value at 0.4%. Wage growth for production and non-supervisory employees fell to 3.9%.

Federal Reserve officials closely monitor wage growth as it helps predict consumer spending, a key driver of the US economy.

The average weekly working hours in September were 34.2, with an expected value of 34.3 and the previous value at 34.3.

The labor force participation rate in September remained stable at 62.7%, in line with expectations and the previous value for August, also at 62.7%, marking the third consecutive month at 62.7%. The employment participation rate for workers aged 25-54 (also known as prime-age workers) declined to 83.8% The household survey used to calculate the unemployment rate shows a stronger outlook for employment growth, with an increase of 430,000 in the number of employed persons, pushing the employment-to-population ratio up to 60.2%, an increase of 0.2 percentage points.

"New Fed News Agency": Strong Employment Report

Previously, a series of data indicated a cooling of the U.S. labor market, such as the non-farm unemployment rate showing a clear upward trend in most previous reports, the continued weakness of the ISM manufacturing employment index, and other indicators of employment growth cooling, making labor market data even more closely watched than inflation, becoming the most closely watched economic data. Policymakers and investors use this to assess whether more signals have been released on whether the U.S. economy can achieve a soft landing.

Due to concerns about further deterioration of the U.S. labor market, the Fed made a significant 50 basis point rate cut in September. Fed Chairman Powell stated on Monday that the U.S. labor market is robust but has clearly cooled over the past year. Protecting the labor market was part of the reason the Fed decided to start a looser cycle with a larger rate cut in September. "We believe we don't need to see further cooling of the labor market conditions to achieve the Fed's 2% inflation target."

After the release of the latest non-farm data for September, traders have canceled bets on a 50 basis point rate cut in November, with expectations for the Fed's future four meetings to cut rates by less than 100 basis points.

Combining several labor market data earlier this week, such as ADP employment data and JOLTS job vacancies, indicates that U.S. labor demand remains healthy, and the number of layoffs remains low. These employment reports clearly alleviate concerns about the labor market cooling too quickly.

Nick Timiraos, known as the "New Fed News Agency," commented:

This is a very strong employment report. Calculated using a three-month average, employment growth in August was revised up from 116,000 to 140,000, and employment growth in September was 186,000.

The U.S. September non-farm employment report may close the door to a 50 basis point rate cut by the FOMC in November, with the rate cut then possibly only 25 basis points.

Boeing Strike May Affect October Non-Farm Payrolls

It is worth noting that the October non-farm employment report will include the impact of the strike by about 33,000 Boeing factory workers last month. Another large-scale strike initiated by American dock workers ended after three days and may not directly impact the October non-farm employment data.

However, another issue is Hurricane Helen, which has caused casualties and damage in large areas of the southeastern United States. Some areas here are working hard to reopen roads and restore power, indicating that businesses will need time to recover.

U.S. Stocks Surge, U.S. Bonds Plunge

After the release of the U.S. September non-farm employment report, U.S. stock futures extended gains, the U.S. dollar index rose in the short term, U.S. Treasury yields rose, and spot gold fell:

• Before the U.S. stock market opens, Nasdaq 100 index futures are up 1%.
• The yield on 2-year U.S. Treasury bonds surged by 16 basis points to 3.87%, while the yield on 10-year Treasury bonds rose by 9 basis points to 3.94%.
• The U.S. dollar index rose more than 60 points in the short term. Offshore Chinese yuan against the U.S. dollar fell nearly 400 points intraday.
• Gold plummeted by about $30 from its earlier high shortly after the non-farm payroll report was released