In September, the US economy defied expectations by adding a robust 336,000 jobs, outpacing predictions. This surge in hiring, nearly double what economists anticipated, also led to upward revisions for July and August, with 236,000 and 227,000 jobs added in those months, respectively.
Amid the Federal Reserve's efforts to control inflation, employment growth had shown signs of slowing, but it held up well. This positive trend fuels hopes of achieving a "soft landing," where inflation stabilizes and recession is averted. Wall Street and Washington closely monitor this monthly employment report as a crucial indicator of the nation's economic health, excluding farm employment due to seasonal fluctuations.
The headline unemployment rate remained steady at 3.8% in September, with significant job gains in the leisure, hospitality, and government sectors.
As the Fed prepares for its upcoming rate-setting meeting on Halloween, it is expected to keep rates unchanged. Last month, the central bank's documents indicated an average expectation among officials that unemployment would reach 4.1% next year, down from the earlier median projection of 4.5%.
Paul Ashworth, Chief North America Economist at Capital Economics, believes the strong job growth suggests a "soft landing" for the labor market. However, the report prompted a rise in benchmark 10-year US Treasury yields and a decline in leading stock indices on Wall Street, as investors considered the possibility of further rate hikes by the Fed.
Jerome Powell, the Fed's chair, has acknowledged a "soft landing" as a possibility but not his primary expectation. He cited external factors like strikes and government shutdown threats as potential risks.
In response to the jobs report, Jason Furman, former Chair of the White House Council of Economic Advisers, expressed initial shock, followed by cautious optimism about a sustainable increase in labor supply.
The data is expected to reinforce the belief that interest rates will remain elevated for an extended period and increase the likelihood of another Fed rate hike this year, according to Mike Bell, a strategist at JPMorgan Asset Management.
It's worth noting that ADP's recent national employment report indicated the addition of 89,000 private-sector jobs in September, significantly below expectations. However, economists consider this reading an "unreliable indicator" of official data.