The US economy added far more jobs than expected in September, pointing to a vital employment picture as the unemployment rate fell, the Labor Department said on Friday.
Nonfarm payrolls rose 254,000 for the month, up from a revised 159,000 in August and better than the 150,000 Dow Jones consensus forecast. The unemployment rate fell to 4.1%, down 0.1 percentage point.
With upward revisions from previous months, the report eased concerns about the state of the labor market and likely locked the Federal Reserve into a more gradual pace of rate cuts. August’s total was revised up by 17,000 while July saw a much larger addition of 55,000, bringing the monthly increase to 144,000.
The strength in job creation was transmitted to wages, as average hourly earnings rose 0.4% on the month and were up 4% from a year ago. Both figures were ahead of the respective estimates for gains of 0.3% and 3.8%. Average weekly work fell to 34.2 hours, down 0.1 hour.
“It was ‘wow’ across the board, much stronger than expected,” Kathy Jones, chief fixed income strategist at Charles Schwab, said of the report. “The bottom line is that it was a very good report. You get upward revisions and it tells you that the labor market continues to be healthy and that means the economy is healthy.”
Stock futures added to gains after the report, while bond yields moved sharply higher.
Restaurants and bars led the month’s job creation, with the hospitality industry adding 69,000 jobs in September after an average of just 14,000 over the previous 12 months.
Health care, a consistent leader in job growth, contributed 45,000, while government increased by 31,000. Other gainers were social assistance (27,000) and construction (25,000).
A more inclusive measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons fell to 7.7%. The share of the labor force either working or looking for work, known as the labor force participation rate, remained steady at 62.7%.
The household employment survey, which is used to calculate the unemployment rate, showed an even stronger picture, with a gain of 430,000 as the employment-to-population ratio rose to 60.2 percent, up 0.2 of a percentage point.
Job creation was heavily skewed toward full-time jobs, which rose by 414,000, while those reporting part-time work fell by 95,000.
Futures prices shifted sharply after the report, with investors now attributing a strong likelihood of consecutive interest rate cuts by the US Federal Reserve in November and December.
The report comes with questions about the strength of the labor market and how that will affect the Fed’s approach to cutting interest rates.
Earlier this week, Fed Chairman Jerome Powell called the jobs picture “robust,” but said it has “clearly cleaned up” over the past year.
There was little sign of an increased rate of layoffs, as new claims for jobless benefits held steady, but hiring rates fell. Business surveys, including the Fed’s own “Beige Book” summary of business conditions, indicate that companies are holding capital numbers fairly steady.
Powell and other Fed officials have signaled a willingness to continue cutting interest rates after last month’s half-percentage-point cut in the overnight lending rate. However, there is considerable market debate over how quickly the central bank will move, and Powell said on Monday that he expects the Fed to move with quarterly hikes at least until the end of the year.