- Non-farm payrolls rose by a decent 136k in September, a bit below consensus expectations. On the upside, the prior two months of hiring was revised up 45k jobs.
- After revisions, private services hiring slowed to 114k new jobs, down from 122k in August. Goods sector hiring was up very slightly (+5K) largely driven by construction (+7k). Not surprisingly, the manufacturing sector shed 2k positions. Services sector hiring slowed from August’s pace in a number of categories: retail (-11k), financial (+3k), business services (+34k), education (+40k) and government (+22k).
- Government employment had recently been boosted by census worker hiring, but that wasn’t a factor in September. Job gains were largely at the local government level.
- The bigger surprise was a two-tick drop in the unemployment rate to 3.5%. That is a new cycle-low, and the lowest level in nearly 50 years. The participation rate held steady, indicating that the drop was driven by people moving out of unemployment and into jobs.
- Unfortunately, despite low unemployment and decent hiring, wage gains were disappointing. Average hourly earnings were flat in September. That left wage gains up 2.9% on a year-on-year basis.
Key Implications
- After the disappointing ISM reports earlier this week, the September jobs report provides some reassurance that the slowdown hasn’t hit hiring too hard. Still, payroll gains continue to slow as would be expected at this point in the economic cycle. We expect monthly hiring to slow towards 100k per month toward the end of the year, as outlined in our recent forecast.
- Although the report is somewhat encouraging, that is not to say there aren’t some concerning weakening trends. Continued weakness in manufacturing hiring echoes the downturn in the ISM. As discussed in our recent report, weaker foreign demand growth and elevated trade uncertainty have dampened activity in the sector. The lack of wage growth isn’t good news for income growth either. We expect these weak spots and looming global risks will lead to at least to one more rate cut by the Federal Reserve this year.
