The much-anticipated September jobs report from the Bureau of Labor Statistics has been released. It provides critical insights into the labor market and its potential impact on the Federal Reserve’s monetary policy in the coming months.
Today's report is particularly crucial for Wall Street and major industries, as it could affect the Federal Reserve's interest rate decision and consumer spending and be a factor in this election season.
Key Highlights of the September Jobs Report: Job Growth and Unemployment Rate
Total nonfarm payroll employment increased by 254,000 in September, exceeding expectations and demonstrating solid job growth across several major industries. The unemployment rate edged down to 4.1%, slightly better than the anticipated 4.2%.
Graph - Unemployment rate data through September
Employment continued to trend up in food services, healthcare, government, social assistance, and construction—indicating continued resilience in these sectors despite broader economic uncertainties.
Labor Market Trends and the Federal Reserve's Response
Graph - Labor force participation rate
These labor statistics provide important context for the Federal Reserve's interest rate decision. A larger-than-expected increase in nonfarm employment, combined with a slight decrease in the unemployment rate, points to a robust labor market despite previous signs of a slowdown.
The labor force participation rate held steady at 62.7%, while the employment-population ratio remained little changed at 60.2%.
Katie Nixon, Chief Investment Officer at Northern Trust Wealth Management, explained that the shift in power has recently moved back to employers, easing wage pressures that have been a significant factor in inflation. Wage growth in September was 0.4%, resulting in a year-over-year increase of 4.0%, indicating that wage pressures are easing but still present.
Upside and Downside Risks in the Labor Market and Job Growth
Ryan Sweet, Chief US Economist at Oxford Economics, previously pointed out that September might be the last “clean” reading economists get on the labor market for a while due to disruptions such as the dock workers' strike, now largely resolved, and the impacts of Hurricane Helene. The September jobs report did indicate that Hurricane Francine, an earlier storm, had no discernible effect on national payroll employment, hours, or earnings.
Employment gains were notably higher than the average monthly gain of 203,000 over the past year, showing a solid trend in hiring. Food services and drinking places added 69,000 jobs, while health care added 45,000 new jobs, particularly rising in home health care services and hospitals. The construction sector continued to trend upward, adding 25,000 jobs, which aligns with broader growth trends in nonresidential specialty trade contractors.
Broader Labor Market and Industry Trends
Manufacturing and services surveys suggest slower hiring, and job openings have declined, reducing the ratio of job vacancies to unemployed workers. However, the latest data shows that industries such as food services, health care, and construction are seeing steady job growth.
The quits rate—a key indicator of worker confidence—has recently dropped, suggesting that workers are less confident about making career moves compared to earlier this year. The labor force participation rate remained unchanged at 62.7%, showing stability in worker engagement.
Joseph Brusuelas, Chief Economist at RSM, explained that the leverage workers once had has diminished as the economy has settled into a more balanced state. Though the numbers were stronger than expected and the jobs market is still "holding up," we are seeing signs of a drop in momentum compared to the "Great Resignation" period. The employment-to-population ratio and labor force participation rate are crucial indicators of the broader labor market dynamics.
Additional Insights from the September Employment Report
Andrea Lisi, CFA, highlighted the strength of the September jobs report on LinkedIn, stating, "I am optimistic about our economy's potential to continue expanding into 2025." This optimism aligns with the upward revisions for previous months, showing that employment growth is stronger than initially reported.
The September jobs report also highlighted notable revisions to prior months, with July's nonfarm employment revised up by 55,000 to +144,000, and August's revised up by 17,000 to +159,000. These adjustments indicate an upward trend that suggests stronger employment growth than previously reported.
Employment in government continued its upward trend, with a gain of 31,000 jobs in September. This increase was primarily driven by local and state government employment, which added 16,000 and 13,000 jobs respectively.
Average hourly earnings for all employees on private nonfarm payrolls increased by 13 cents to $35.36, a rise of 0.4%. Over the past 12 months, average hourly earnings have increased by 4.0%, reflecting ongoing wage growth, albeit at a potentially slower pace.
The number of people jobless for less than 5 weeks decreased by 322,000 to 2.1 million, showing an improvement in short-term unemployment. Meanwhile, the number of long-term unemployed remained relatively unchanged at 1.6 million, accounting for 23.7% of all unemployed individuals.
Despite these positive signs, the labor market faces some challenges. The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.2 hours, suggesting a possible softening in labor demand. Additionally, the number of people employed part-time for economic reasons and not by choice remained elevated at 4.6 million, indicating that many workers are still unable to find fulltime employment opportunities that they desire.
Overall, while the September jobs report highlights significant gains and resilience in key sectors such as health care, government, and construction, the data show there are still underlying weaknesses in terms of labor demand and part-time employment. The Federal Reserve will need to weigh these mixed signals carefully as it considers future interest rate decisions.
Implications for Interest Rates and the Economy
The latest September jobs report is especially significant as it provides the last reliable snapshot of the labor market before the upcoming presidential election. The Federal Reserve's interest rate cuts remain possible, with these labor statistics playing a major role in shaping monetary policy decisions. Better-than-expected job growth and stable unemployment may reduce the urgency of aggressive interest rate cuts. Still, we expect the Federal Reserve will closely monitor labor turnover survey data and other key metrics, such as unemployment benefits claims, in the coming weeks.
Whether the Federal Reserve continues its steady rate cuts or takes a more aggressive approach will hinge on what unfolds in the labor market as we move forward. Investors, businesses, and policymakers alike will be keeping a close eye on these developments, particularly in key industries such as healthcare, construction, and government, where hiring has remained resilient.
Stay tuned for ongoing updates and analysis on how these labor statistics might influence not only the economy but also the Federal Reserve’s next moves. At Aura, we are soon releasing our October Hiring Trends report, which will add additional context to this jobs report. With key indicators such as job growth, the unemployment rate, and labor force participation all showing nuanced changes, the direction of interest rates and broader economic stability will remain under the spotlight in the coming weeks.
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