Minneapolis (CNN)— Fall is here, pumpkin spice lattes are flowing, and in some states, there’s a bite in the air from the first cold snap of the season. But not for the US jobs market: September was a scorcher.
The US economy added an estimated 336,000 jobs last month, blowing expectations out of the water, according to Bureau of Labor Statistics data released Friday.
It’s the largest monthly employment increase since January and is significantly above August’s net gain of 227,000 jobs, a total that was revised up by 40,000 from initial estimates.
Job growth in the height of the summer was hotter than initially thought: In addition to August’s upward revisions, July’s gains were revised up by 79,000 to 236,000.
“The job market is tinder-box hot,” said Sung Won Soh, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.
In September, leisure and hospitality helped drive job growth higher, with 96,000 jobs added. That’s above the pace of 61,000 jobs a month that this sector has seen during the past 12 months, according to the BLS report. Government jobs also saw a hefty boost, rising by 73,000.
The job growth occurred across all major sectors.
President Joe Biden touted the stronger-than-expected report on Friday.
“It’s no accident, it’s Bidenomics, we’re growing the economy from the middle out, the bottom up and not the top down,” Biden said during a press conference. “And inflation’s coming down at the same time.”
The unemployment rate held steady at 3.8% in August, and the number of unemployed workers was essentially unchanged at 6.4 million.
Consensus estimates from economists were for 170,000 net jobs added and a jobless rate of 3.7%, according to Refinitiv.
While September marks the 33rd consecutive month of job growth for the United States, the Federal Reserve has been aiming to slow the economy and cool down the labor market.
Dow futures tumbled by more than 200 points on the news, with futures on the S&P and Nasdaq falling by around 1% and 2%, respectively, as traders anticipated an additional rate hike from the Federal Reserve.
Wages not as hot
Job growth may be generating plenty of heat, but wages are cooling off.
Average hourly earnings rose by 0.2% in September, bringing the annual gain to 4.2%, according to the Bureau of Labor Statistics’ jobs report released Friday.
That lands below economists’ expectations for a monthly uptick of 0.3% and annual increase of 4.3%, according to Refinitiv.
September’s wage growth is the lowest seen monthly since February 2022 and year-over-year since June 2021, noted Andrew Patterson, Vanguard senior economist.
“Like most reports, the Fed will find things to like and dislike here,” Patterson wrote Friday. “Inflation data will weigh heavily this month ahead of [the Fed’s next meeting on October 31 and November 1].”
The resiliency of the labor market has helped to keep consumer spending strong and the economy churning, but Fed officials have expressed concern that rising wages could be too much of a good thing and put upward pressure on inflation.
Inflation gauges closely tracked by the Fed have cooled significantly since hitting highs last year; however, they’ve been easing at a slower pace in recent months, thanks in part to a pickup in gas prices.
At this point, despite the stronger-than-expected job growth, there aren’t indications that wage growth is going to accelerate, said Jim McCoy, senior vice president at staffing firm ManpowerGroup.
“If you look at the sectors where you have the biggest gains — leisure, government and health care — they’re typically not sectors that have driven a lot of the wage inflation,” he said. “What we have seen is that wage gains made by entry-level workers have really stuck. We saw great gains for workers in the $15 to $20 an hour range over the last couple of years; we’re not seeing that upward pressure now.”
Cooling inflation has helped Americans finally see real wage growth in recent months.
A key labor force metric ticks down
Other key labor force metrics held steady during September: Average workweek hours were unchanged at 34.4 hours, indicating that employers were not cutting back on hours worked, and the labor force participation rate didn’t budge from 62.8%.
However, there was a slight step back in the labor force participation rate for women in their prime working age of 25 to 54 years old, the report showed. After setting an all-time high in June at 77.8%, that rate is now 77.4%, dropping 0.2 percentage points from August.
“In future months, we are watching this number closely as expiring federal child care funding could sideline working mothers,” Daniel Zhao, Glassdoor’s lead economist, wrote in commentary issued Friday.
The federal pandemic-era child care stabilization grant program ended on September 30.
The historic federal investment, which was part of the $1.9 trillion American Rescue Plan Act that Democrats passed in March 2021, supported more than 220,000 child care programs, affecting as many as 9.6 million children, according to the federal Administration for Children and Families.
Nationwide, more than 70,000 child care programs are projected to close, and about 3.2 million children could lose their spots due to the end of the child care stabilization grant program, according to an analysis by The Century Foundation.
Revisions show stronger job growth
Federal data is fluid and frequently subject to change as more detailed and accurate information becomes readily available. Today’s headline jobs number — that surprising 336,000 net job gain — is an initial estimate that will be revised twice more.
Approaching Friday, economists told CNN they would be closely watching how the latest revisions would shake out, because every monthly job gain during the first half of the year was ultimately revised downward (a cumulative difference of 325,000 jobs), Bureau of Labor Statistics data shows.
“Many are interpreting this streak of downward revisions as a sign that we could be at an inflection point and that the labor market could be weakening even more rapidly than the official data suggests,” Julia Pollak, senior economist at ZipRecruiter, told CNN earlier this week.
The surprising September jobs report, however, didn’t continue that streak. July’s monthly gains (initially revised down by 30,000 jobs) saw an upward bump of 79,000 jobs this time around to bring the monthly gain to 236,000 positions. August’s second look has job growth now at 227,000 for the month, an increase of 40,000.
Still, she added, those latest revisions as well as the September surge do align with other recent economic data points, specifically strong consumer spending.
“The data is hard to capture, because the economy is moving much more rapidly,” Diane Swonk, KPMG’s chief economist, said in an interview with CNN Friday. “I talk to [executives] all the time, and one of the hardest issues they say about the post-pandemic economy is just how rapidly things shift.”
That’s the economy we’re in, she said, and it requires more agility.
“But at the end of the day, it’s still more resilient,” she said. “It’s remarkably resilient. And that’s a wonderful thing.”