Delayed September jobs report shows U.S. economy added 119,000 jobs, more than expected

Key Concepts

• Non-Farm Payrolls: A key economic indicator measuring the number of paid U.S. workers, excluding farm laborers, private household employees, and non-profit organization employees.
• Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment.
• Labor Force Participation Rate: The percentage of the working-age population that is either employed or actively looking for work.
• Average Hourly Earnings: A measure of the average wage paid to workers per hour, used to gauge wage inflation.
• Hours Worked: The average number of hours employees work per week, indicating labor demand and productivity.
• U6 Unemployment Rate (Underemployment Rate): A broader measure of unemployment that includes discouraged workers and those working part-time for economic reasons.
• Initial Jobless Claims: The number of individuals who have filed for unemployment benefits for the first time during a given week.
• Continuing Claims: The number of individuals who are still receiving unemployment benefits.
• Treasury Yields: The interest rate paid on U.S. Treasury bonds, reflecting the cost of borrowing for the government and influencing other interest rates.
• Federal Reserve Minutes: A record of the discussions and decisions made during the Federal Reserve's monetary policy meetings.

September Jobs Report Analysis

The September jobs report, released with some data gaps from previous periods, presented a mixed picture.

• Non-Farm Payrolls: Increased by a robust 119,000. This figure represents the best performance since April, when 158,000 jobs were added. Notably, the previous month's figure was revised downwards from 22,000 to -4,000.
• Unemployment Rate: Unexpectedly ticked up from 4.3% to 4.4%. The last time the unemployment rate was at this level was October 2021, when it stood at 4.5%.
• Labor Force Participation Rate: Showed a positive uptick to 62.4%. This is the highest rate since May, with a higher figure of 62.6% last seen in April of the current year.
• Average Hourly Earnings:
  • Month-over-Month: Increased by 0.2% (2/10ths), which is considered on the weaker side, as 0.3% was expected. This 0.2% increase matches the figure from June, and a lower number (0.1%) was last observed in August 2023.
  • Year-over-Year: Improved to 3.8%, up from the previous 3.7% and exceeding expectations of 3.8%. This 3.8% is the best performance since July, when it was 3.9%. The year's high watermark for year-over-year earnings growth was 3.9%, recorded in the first three months of the year.
• Hours Worked: Remained steady at 34.2 hours per week. To find a lower number, one would have to go back to January, when it was 34.1 hours.
• U6 Unemployment Rate (Underemployment Rate): Decreased to 8.0%, down from the previous 8.1%. This 8.0% matches the level seen in February. A higher rate was last observed in October 2021.

Initial and Continuing Jobless Claims

• Initial Jobless Claims: For the week of November 15th, initial jobless claims came in at 220,000, lower than the expected 227,000. These figures are described as "very well behaved" and do not indicate nervousness in the labor market. The 220,000 claims represent the lowest level since mid-July.
• Continuing Claims: Saw a slight increase to 1,974,000. This is the highest level of continuing claims since November 2021.

Market Reaction and Federal Reserve Implications

• Treasury Market: Yields experienced some gyrations but settled around 4.11%, slightly lower than the pre-opening hover of 4.14%.
• Equity Markets: Responded positively to the data, with Dow futures up by 371 points and S&P futures up by over 80 points. The Nasdaq was indicated up by approximately 425 points.
• Federal Reserve Perspective: The report's data, while generally "pretty good," is not "off the charts good." The unexpected uptick in the unemployment rate might fuel expectations for interest rate cuts ("ease"). However, the Federal Reserve's minutes from their last meeting indicated that easing might not be appropriate given "puzzle pieces missing," suggesting a cautious approach due to incomplete data.

Conclusion

The September jobs report presented a complex economic landscape. While job creation was solid and wage growth showed improvement year-over-year, the unexpected rise in the unemployment rate and the slight increase in continuing claims introduce some uncertainty. Equity markets reacted favorably, but the Federal Reserve's cautious stance, as highlighted in their recent minutes, suggests that a definitive shift in monetary policy is unlikely without further clarity on the economic outlook. The data, despite its gaps, indicates a labor market that is performing reasonably well but not without its nuances.