September jobs report: 254,000 new jobs will be created in the US

The US added 254,000 jobs in September, far exceeding expectations, while the unemployment rate fell to 4.1% from 4.2% in August.

According to forecasts, 150,000 new jobs were created last month. The data from previous months was also revised upwards: August by 17,000 to 159,000 and July by 55,000 to 144,000.

Economists had expected the unemployment rate to remain unchanged at 4.2%.

The higher-than-expected job gains came just over a month before Election Day, as the economy faces increased scrutiny during the election campaign between Vice President Kamala Harris and former President Donald Trump.

Harris has praised the Biden administration's progress in creating jobs during the Covid recovery period, while Trump has sought to portray the economy as a disaster despite data showing otherwise.

And more relief is likely on the horizon: The Federal Reserve's steeper-than-expected interest rate cut last month is still holding, which economists say should help boost demand in industries sensitive to lending rates, such as manufacturing Commercial, residential and automotive industries.

Forecasts call for another quarter-point rate cut at the next Fed meeting in November and another in December, with more to come next year.

“This is … a full-employment economy in an economy best described as (in) a robust expansion,” Joseph Brusuelas, chief economist at financial group RSM US LLP, said in a post on X.

A key caveat to the report was the response rate to the Bureau of Labor Statistics' monthly survey: At just 62%, it was the lowest for a September report since at least 2010.

This could form the basis for a major revision next month as more data comes in.

And the hiring wasn't evenly distributed, instead concentrated in construction, health care, leisure and hospitality, and government jobs. White-collar sectors such as business and professional services and finance saw negligible job additions, while overall manufacturing hiring fell.

While the economy continues to add jobs steadily, signs of continued labor market weakness had already become clear before Friday's report.

The Bureau of Labor Statistics reported this week that the hiring rate fell to just 3.3%, the lowest level since October 2013, when the U.S. economy was beginning to emerge from the Great Recession.

Last week, the Conference Board's closely watched consumer confidence survey fell by its sharpest decline since August 2021, largely due to worries about the job market. Less than one in three respondents now say there are “lots” of jobs, while almost one in five say they are “hard to get”.

In a statement accompanying the news release, Dana M. Peterson, chief economist at the Conference Board, said that while the labor market remains “fairly healthy,” workers are struggling with shorter hours, slower wage increases and fewer job openings.

Guy Berger, director of economic research at the Burning Glass Institute, a labor research and consulting group, said a few months ago it was “difficult” to find a new job.

These days, Berger said ahead of Friday's report, he would downgrade that to “really tough.” Companies are simply figuring out how to do more with fewer employees, which is also reflected in increasing productivity growth.

“This could be something new – a new strategy that companies are pursuing,” Berger said. “It definitely seems different.”

In an email following Friday's report, Berger said no new trend had yet been established.

“It’s just a month and a report,” he wrote. “I think the gradual underlying trend of deterioration in the labor market is probably still ongoing. The good news is, even if that's true, we now have more room for the Fed to ease and keep the labor market in relatively good shape.”

And there will probably not be a turnaround for job seekers any time soon, he said. While Federal Reserve officials have indicated they don't want to see any further signs of deterioration in the labor market, they also won't allow things to “come to a boil,” especially given the hiring spree at the start of the pandemic increasing again This period coincided with a period of rising inflation.

“The chance that we find a good time to find a job — it might take a while,” Berger said.

The stress is also reflected in other data: the proportion of unemployed people who have been unemployed for more than six months has increased by seven in the last ten months and is now around 23%.

This is roughly the situation before the outbreak of the pandemic. But it is an indication that job loss is increasingly associated with a longer break.

There are still positive economic indicators: layoffs and new unemployment claims remain subdued. And economists say the Federal Reserve's latest rate cut, which was deeper than expected – and more cuts are likely to follow – should help boost activity in sectors of the economy that rely on credit, such as housing and manufacturing and in the automotive industry.

Gas prices are also unusually low, contributing to additional consumer spending.

With a bit of luck, the US should be able to avoid a recession, said Berger. But the economy could easily find itself in an even more precarious situation.

For job seekers, this precarity is now fully developed.

“There is now a big gap between people who are looking for a job and those who have one,” said Berger.