The US workforce added 336,000 jobs last month, much more than expected, as the world’s largest economy remained resilient in the face of higher interest rates.
The sharp acceleration in hiring saw non-farm payrolls rise during September by almost double the rate anticipated by economists. Readings for July and August were also revised higher, with 236,000 and 227,000 jobs added, respectively.
Employment growth had been fading in recent months, according to official data, but remained largely resilient while the Federal Reserve battled to get inflation under control. This bolstered hopes that the central bank will manage to guide the US economy to a so-called “soft landing”, where price growth normalizes and recession is avoided.
The closely watched monthly report is seen on Wall Street and in Washington as a key indicator of the health of the US economy. It excludes farms because of seasonal variation.
The headline unemployment rate held firm at 3.8% last month. The leisure and hospitality sectors helped drive the jump in payrolls growth, adding 96,000 jobs. Government employers also added 73,000 jobs.
The news comes as policymakers at the Fed prepare to meet on Halloween for their latest rate-setting meeting. They are expected to hold rates steady. When officials convened last month, documents released by the central bank revealed that they on average expected unemployment would rise to 4.1% next year, down from a median projection of 4.5% earlier this year.
The latest report “suggests the labour market is enjoying a soft landing”, Paul Ashworth, chief North America economist at Capital Economics, said. “The surprisingly strong 336,000 increase in non-farm payrolls in September adds to the evidence on real activity that the economy is holding up well despite the headwind from higher interest rates.”
Benchmark 10-year US treasury yields hit their highest levels in 16 years following the release, and leading share indices declined on Wall Street, as investors considered whether the Fed would raise rates further in the months ahead.
Jerome Powell, the central bank’s chair, has previously described a “soft landing” as plausible, but not his baseline expectation. He said factors outside the Fed’s control, such as the autoworker strike and the threat of a government shutdown, could knock the US economy.
Jason Furman, former chair of the White House council of economic advisers under Barack Obama, wrote on X, formerly known as Twitter: “First reaction to jobs numbers: Shock. Second reaction: Nervousness. Further reflection: This could be quite good… We could be in the middle of a sustainable increase in labor supply.”
The latest data “will reaffirm the market’s conviction that rates will stay higher for longer,” Mike Bell, a market strategist at JPMorgan Asset Management, said. “It also increases the probability of another rate hike from the Fed this year.”
Payroll company ADP released its latest national employment report on Wednesday, showing that private-sector employers added 89,000 jobs in September, far fewer than expected. Economists approach such readings with care, however. The reading is an “unreliable indicator” of official data, Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said.
