U.S. hiring experienced a notable surge last month, providing further evidence of the strength of the American economy and contributing to the recent bond-market upheaval.
In September, employers added a staggering 336,000 jobs, marking the most substantial gain since January and a significant increase from the upwardly revised 227,000 gain in the previous month, according to the Labor Department. This rapid acceleration in job growth indicates an economic rebound after a slower labor market during the first half of the year.
The unemployment rate remained steady at 3.8% in September, while employers continued to raise wages at a robust pace in order to attract talent from a limited pool of workers. Average hourly earnings rose by 4.2% compared to last year, only slightly down from the 4.3% increase in August. Although slower than the previous year, these figures surpass the prepandemic rate by a considerable margin.
The leisure and hospitality sector significantly contributed to the increase in hiring, with employment at restaurants and bars returning to prepandemic levels, as stated by the Labor Department. Additionally, hospitals, nursing homes, and truckers also added jobs during the same period. Notably, the start of the school year led to a surge in hiring as well.
The release of the jobs report coincides with a selloff in long-term bonds, driving yields to their highest levels in 16 years. This tightening of financial conditions has raised concerns about the possibility of an economic soft landing, where the economy cools down enough to control inflation without plunging into a recession. The robust job growth observed in September could further drive up bond yields by affirming the strength of the labor market.
Over the past 18 months, the Federal Reserve has gradually increased interest rates to combat inflation and slow down economic growth. However, if inflation remains under control and financial conditions remain tight, there could be less pressure on Fed officials to implement further rate hikes later this year. The next Federal Reserve meeting is scheduled for early November.
Although last month saw significant gains, there are indications that employers’ demand for labor has somewhat cooled down throughout this year. More individuals have entered the labor force, and fewer employees are quitting their jobs, both of which have contributed to easing the labor shortages experienced since the onset of the pandemic in 2020.