US Employment Beats All Estimates as Unemployment Rate Drops to 4.1%

U.S. job growth exceeded all estimates last month, the unemployment rate dropped unexpectedly and wage growth accelerated, reducing the risk that the Federal Reserve would decide to cut interest rates again in November.

Nonfarm payrolls rose by 254,000 in September, the most in six months, after an upwardly revised advance of 72,000 from the previous two months. According to Bureau of Labor Statistics data released Friday, the unemployment rate fell to 4.1% and hourly wages rose 0.4%.

Combined with data from earlier in the week showing that demand for workers remains high and layoffs remain low, the wages report will likely allay concerns that the labor market is cooling too quickly.

Fed Chairman Jerome Powell this week confirmed that labor market protection was one of the reasons the Fed decided to begin its easing cycle with a larger rate cut in September. Powell and his colleagues believe that further cooling is not needed to bring inflation down to the Fed’s 2% target, he said.

Following this data, stock futures, the dollar and Treasury bond yields rose. Prices in the swap market showed investors giving up on the Fed’s November rate cuts by more than a quarter point.

The solid report could provide a boost for Vice President Kamala Harris entering the final weeks of a presidential race that has focused on voters’ views on the economy.

Fed officials are also paying close attention to wage growth because it can help set expectations for consumer spending, the economy’s main engine. Hourly wages increased 4% compared to last year, the largest increase in four months. Wage growth for production and non-supervisory workers dropped to 3.9%.

Employment growth last month was driven by leisure and hospitality, as well as health care and government. The wage diffusion index, measuring the scale of changes in private employment, rose to its highest level since the beginning of the year.

October report

The October jobs report will include the impact of last month’s strike by about 33,000 workers at the Boeing Co. plant. Another major strike by American longshoremen has ended after three days and is unlikely to have a direct impact on monthly wages.

However, the next obstacle is Hurricane Helene, which has cut a path of death and destruction across the southeastern United States. Some parts of the region are struggling to reopen roads and reconnect electricity, indicating that economic activity will take time to recover.

The latest jobs report showed the so-called underemployment rate – which includes people working part-time for economic reasons and discouraged workers – fell to 7.7% in September, the first decline in almost a year.

The economic activity rate, i.e. the percentage of the population working or looking for work, remains at 62.7% for the third month. The percentage of workers aged 25-54, also known as prime-age workers, dropped to 83.8%.

While layoffs have not been the main cause of the cooling labor market in the U.S., they are growing in other countries. Samsung Electronics Co. is laying off workers in Southeast Asia and Oceania as part of a global job cuts plan, and Volkswagen AG is cutting jobs in China and considering closing plants in Germany.

With help from Cécile Daurat, Alex Tanzi, Mark Niquette and Carter Johnson.