Job Growth Undershoots Expectations, But Enough for Rate Hikes?

The United States economy logged some job growth in September, with wages also on the upswing.  The latest statistic released Friday by the Labor Department showed a net gain of 156,000 jobs for the month.

That tally marks the smallest advance since May of this year.  And it came in below forecasts of economists for gains of about 170,000.  But that number, which reflects non-farm-related job growth, may be enough to fuel optimism for economic activity.  So too, and perhaps paradoxically, is the latest unemployment number, where a 10 basis point gain bumped that metric up to five percent.

The headlines imply that the Fed may raise rates given the steady march of employment gains.  The most heartening sign might be that wages were also on the upswing, with growth of 2.6 percent year over year in the month. The wage growth is perhaps the metric that implies inflation may be in the offing and thus the Fed may act to boost rates (eventually).  The jobs report from Friday, as noted by The Wall Street Journal, is the last one before the election, and the trends indicate that unemployment is “leveling off” — and that may have an impact on voting.

In the meantime, there are two more meetings left in the year for the Fed, at which they may officially raise rates. The unemployment rate is in the range of the 4.7 percent to 5 percent that has yet to trigger inflation.  As more workers return to the job market, though, and that metric shrinks, then inflation tips into positive territory, usually.

The labor force participation rate is low enough at 62 percent to signal that more workers will indeed return to active job seeking.  Should hiring continue, eventual output by firms would increase, and GDP would pick up beyond the somewhat anemic levels of 2.1 percent seem most recently, and where the long term average has been closer to 3 percent.

In drilling down a bit into the jobs added, services continued to dominate, at 67,000 net new positions, and follow by health care at another 33,000.


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