The U.S. economy added 263k jobs in September, coming in slightly above the consensus forecast of 250k. Revisions to the two prior months were slightly positive, with July’s reading adding an additional 11k jobs to the previously reported figures, while August was unchanged at 315k.
Employment gains on the service-side (+244k) were largely concentrated in leisure & hospitality (+83k), health care & social assistance (+75k) and professional & business services (+46k). Financial activities (-8k), transportation & warehousing (-7.9k), and retail trade (-1.1k) all shed jobs on the month. Goods producing industries (+44k) had another decent month, with gains spread across manufacturing (+22k) and construction (+19k). The public sector lost 25k jobs last month.
In the household survey, civilian employment rose by 204k, while the labor force declined by 57k. As a result, the unemployment rate ticked down 0.2 percentage points (pp), falling back to 3.5% – matching its previous cyclical low. The participation rate edged lower by 0.1pp, falling to 62.3.
Average hourly earnings rose 0.3% month-over-month (m/m) – unchanged from the gain recorded in August. Compared to September 2021, wage growth was up 5.0%.
Key Implications
Another month, another solid employment report. That being said, both August and September’s gain came in below the average recorded in each of the respective three months prior, suggesting we are starting to see some slowing in the pace of hiring. This is particularly evident with outright jobless coming through in several service industries.
After having recorded a sizeable gain in August, the pullback in labor force participation was disappointing but somewhat expected given the lackluster growth seen so far through this year. While we do expect labor force participation to edge modestly higher over the remainder of the year, aging demographics would suggest there’s not a lot more room to run, and the participation rate is likely to peak by early-2023.
“Good news is bad news” has been the mantra touted more recently, and that tone is certainly ringing true across financial markets following this morning’s release. Equity futures have sold-off, while expectations that the Federal Reserve will deliver on another 75-basis point hike on November 2nd are holding steady at 78%. With the FOMC only seeing one more inflation report before they meet next, another super-sized rate hike seems likely.
