United States experienced a boost in its job market in September, with a drop in the unemployment rate to 4.1 percent, indicating less necessity for the Federal Reserve to continue large interest rate reductions in the remaining meetings of the year.
An addition of 254,000 positions in nonfarm payrolls was reported last month, a significant increase from the revised 159,000 in August. This is according to the employment report the Bureau of Labor Statistics in the US Labor Department published on Friday. Contrary to the expectations of economists who predicted an increase of 140,000 after a rise of an initially reported 142,000 in August.
Over the last decade, the first payrolls count for August has generally been adjusted upwards. Varied expectations were set for September’s job gains, with estimates ranging from 70,000 up to 220,000 positions.
A surge in immigration primarily causes the labour market to slow down, resulting in meagre hiring in the face of increased labour supply. However, a consistently low number of lay-offs supports the economy through steady consumer expenditure.
An increase of 0.4 per cent was seen in the average hourly earnings after 0.5 per cent gain in August. Over the year, wages went up by 4.0 per cent following a 3.9 per cent rise in August.
There was a decrease in the unemployment rate from 4.2 per cent in August, following a jump from 3.4 per cent in April 2023, partly due to an increase in the 16-24 age group and seasonal lay-offs in July during the annual automobile factory closures.
The Federal Reserve initiated its policy easing cycle with a significant half-percentage-point rate cut last month, with Fed Chair Jerome Powell highlighting increasing worries about the labour market’s health.
Although the labour market has hit a bump, last week’s annual benchmark revisions to national accounts data showed a much improved economic condition than was previously calculated, with positive adjustments in growth, income, savings, and corporate profits.
Powell, this week, denied any rush to immediately cut rates, contradicting investors’ anticipation of another half-percentage-point reduction in November. This comes on the back of an economic upturn he acknowledged himself. In 2022 and 2023, The Fed escalated rates by a total of 525 basis points, and for the first time since 2020, rolled out a rate cut last month, with the policy rate presently between 4.75 per cent and 5.00 per cent.
On Friday, early projections from financial markets suggested roughly a 71.5 per cent likelihood of a quarter-point rate decrease in November, as per the CME’s FedWatch tool. The probability of a 50 basis point cut was close to 28.5 per cent.
However, the labour market, already reeling from the widespread destruction caused by Hurricane Helene in the U.S. Southeast last week, is bracing for more short-term challenges. The impact was also felt in the aerospace sector, owing to a strike by tens of thousands of Boeing machinists in September, which had downstream effects on suppliers.
The strike by roughly 45,000 dockworkers on the East and Gulf Coasts came to an end late Thursday when a provisional agreement was reached between their union and port operators. If the Boeing strike continues into next week, it could adversely affect October’s nonfarm payrolls data, set to be released just before the U.S. presidential election on November 5. – Reuters.