News & Stories

September Jobs Report: Robust Job Gains Follow Interest Rate Cuts

The Bureau of Labor Statistics on Friday reported the U.S. economy added 254,000 jobs in September, a strong addition of jobs compared to more recent reports, which averaged just shy of 150,000 job gains per month over the last five months.

The unemployment rate ticked down from 4.2% to 4.1%, the second month in a row with a decline.

Other economic data reported in September include:

  • Wages increased 0.4% month-over-month and 4% year-over-year.
  • The largest increases in jobs by industry came from food service (+69,000), healthcare (+45,000), government (+31,000), and social assistance (+27,000).
  • Private employers added 143,000 jobs in September, nearly a 50% increase from August, according to ADP.
  • Both primary inflation measures—the Personal Consumption Expenditures (PCE) price index and the Consumer Price Index (CPI)—ticked down in August. PCE sits at 2.2% year-over-year, and CPI is at 2.5%, both lows since inflation started rising in 2022. (Core PCE, which excludes volatile food and energy prices, ticked up slightly and is 2.6%.)

Labor Market Showing Strong Indications of Normalization

The report is the first since the Federal Reserve dropped interest rates for the first time since the start of the COVID-19 pandemic.

Fed chairman Jerome Powell cited slowing job growth and an unemployment rate that has, despite recent increases, remained low as reasons the Fed decided to cut interest rates by half a percentage point.

In a speech at the end of September after rate cuts, Chairman Powell detailed more specifically the positive trends we’re seeing in the labor market:

  • “Many indicators show the labor market is solid,” he said.
  • “The unemployment rate is well within the range of estimates of its natural rate.” It’s now at 4.1%.
  • “Layoffs are low.” Layoff rates remain low at 1% and have consistently been at the lowest levels of the 21st century.
  • “The labor force participation rate of individuals aged 25 to 54 (so-called prime age) is near its historic high, and the prime-age women’s participation rate has continued to reach new all-time highs.” The only time overall prime-age participation rate (83.9%) was consistently higher was the late 1990s. Prime-age women’s participation reached another all-time high in August at 78.4%.
  • “Real wages are increasing at a solid pace, broadly in line with gains in productivity.” Wages have increased 4% year-over-year.
  • “The ratio of job openings to unemployed workers has moved down steadily but remains just above 1—so that there are still more open positions than there are people seeking work.” There are 1.1 job openings for every one unemployed person.

Ultimately, Powell said, the Fed doesn’t need to see more cooling of the labor market for inflation to reach their target inflation rate of 2%.

In September, Lawrence Dearth, Insight Global’s president of recruiting, suggested it will still take a while for the jobs sector to feel the impact of interest rate cuts.

“Just because you start seeing rates decreasing does not mean that all of a sudden every company is going to post their Now Hiring signs,” he said, noting that worker productivity and retention are still essential focus areas during leaner times.

The next Federal Reserve meeting will on November 7, after the U.S. presidential election. Current estimates project the Fed will likely cut interest rates by another quarter or half a percentage point at the meeting.