Today’s jobs report showed that the US labor market was hotter than expected in September, adding 336,000 jobs. Furthermore, July and August payrolls were revised up by a combined 119,000 reversing the previously observed softening. Earlier data from JOLTS (Job Openings and Labor Turnover Survey) showed that job openings were up as well (driven by the rise in Professional and Business Services) suggesting the labor market is stronger than previously thought.
Wages also remain elevated as average hourly earnings increased by 4.2 percent year-over-year in September, compared to 4.3 percent in August. Wage growth is now significantly below last year’s peak of 5.9 percent, but well above prepandemic levels, and the rate of decline has been slow. Our Salary Increase Budget Survey shows that employers expect that elevated wage growth will continue with the average salary increase budget projected to rise by 4.1 percent in 2024. With wage growth staying elevated and consumer spending showing no signs of weakness, we project that the Federal Reserve will increase rates one more time in November and keep interest rates high longer eventually triggering a short but shallow recession.
Unemployment rate remained unchanged in September
The Household Survey revealed that the unemployment rate remained unchanged in September at 3.8 percent. The unemployment rate has hovered around in the 3.4-3.8 percent range since February 2022 with no sign of a material uptick as initial unemployment claims have remained low throughout this time. Similarly, the labor force participation rate didn’t change from August levels and stayed at 62.8 percent.
In-person services and government led job gains
Continuing the recent trend, payroll gains were driven by in-person service industries with health care (+40,900), social assistance (+25,000), and leisure and hospitality (+96,000) gaining jobs. The government added another 73,000 jobs, primarily in state and local government. Together…
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