The upcoming September jobs report, set to be released on Friday, is expected to show a continuation of the gradual cooling in the labor market that began earlier this year. Economists project nonfarm payroll growth of 150,000 jobs, slightly higher than the 142,000 added in August, and a steady unemployment rate of 4.2%, according to the Dow Jones consensus. Wages are forecasted to rise by 0.3% for the month, with a 3.8% annual increase, matching August’s wage growth.
If these predictions hold, it would represent a healthy balance for the U.S. labor market, signaling enough growth to support the economy without overheating. This would likely give the Federal Reserve more leeway to continue its current course of lowering interest rates without feeling pressured to make more aggressive cuts that could spark concerns of an impending recession.
Possible Surprises and Revisions
While expectations are moderate, surprises are always possible, whether it be a stronger-than-expected gain in payrolls or a more significant slowdown. Additionally, revisions to prior months’ data could also influence the overall perception of the labor market’s health. Notably, the Labor Department previously revised its jobs data, revealing an overcount of more than 800,000 jobs for the 12-month period through March 2024. Such revisions add a layer of uncertainty to labor market analysis.
Importance of September’s “Clean” Report Before the Election
The Bureau of Labor Statistics will release the report at 8:30 a.m. ET. Given that October’s job data is expected to be impacted by external factors such as the ongoing dock workers’ strike and Hurricane Helene, this September report could be the last “clean” glimpse of the job market before the U.S. presidential election in November.
Market Focus and Fed Policy Implications
Investors will be closely watching the report for signs of whether the Federal Reserve can continue to gradually lower interest rates or if a more aggressive cut, like the 50 basis point reduction implemented in September, might be necessary. The Fed has signaled further cuts for the remainder of 2024 and into 2025, though market participants are anticipating a more accelerated pace of rate reductions.
Labor Market Trends and the Bigger Picture
The broader labor market has shown signs of softening in recent months, though not dramatically. Hiring in both the manufacturing and services sectors has slowed, and Fed Chair Jerome Powell recently described the labor market as “solid but softening.”
Job openings have also decreased, pushing the ratio of available jobs to unemployed workers down to 1.1:1 from a peak of 2:1 in previous years. This cooling follows the “Great Resignation,” a period marked by widespread job-switching as workers sought better opportunities. Currently, the quits rate stands at 1.9%, its lowest since December 2014, reflecting a more cautious labor market, while the overall separations rate is at its lowest point since December 2012.
The September jobs report will play a key role in shaping expectations for the labor market’s trajectory and the Federal Reserve’s response in the months ahead.
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