Commentary Directory

A Wacky September Jobs Report Shows Strong Labor Market

Jacob Hess
October 06, 2023

Today's jobs report was a bit wacky, filled with unexpected data that underscores the volatility of labor market statistics. While some indicators point to a robust job market, others suggest underlying weaknesses. And a whole bunch of revisions make the whole thing even more confusing. Let's break down the numbers and see what they mean for the economy and possibly for the Federal Reserve's next moves.

From BLS

The most striking aspect of the report was the surge in nonfarm payroll employment, which added 336,000 jobs in September. This figure more than doubled the consensus expectations of 150,000, effectively debunking the notion that the labor market was on a downward trajectory. Revisions have been notable over the last few months, and most of those have been to the downside. However, in a bit of a twist, we saw revisions for July and August that added 119,000 jobs in total (July revised up 79,000 to 236,000 and August revised up 40,000 to 227,000). Despite the revisions, the September jobs gain was the largest this year. Finally, he unemployment rate remained at 3.8% after the few pips gain in August as the number of unemployed individuals was basically unchanged (only up 5,000) and the labor force participation rate stayed at 62.8%. All of these data points point to a strong labor market taking analysts and likely the Fed by surprise.

However, the report wasn't without its caveats. Household data indicated that the uptick in employment was largely fueled by part-time workers, which increased by 151,000, while full-time workers actually decreased by -22,000. This lends credence to the idea that the significant job gains may be a result of seasonal hiring as we approach the holiday season in Q4. This is further supported by the fact that the service sector did all of the heavy lifting this month. Services firms added 234,000 jobs, while the goods sector saw a modest bump of just 29,000. Wage growth took a small step down in September to contribute to weak hiring narrative. Average hourly earnings improved 0.21% MoM and was up 4.15% YoY, down from 4.26% YoY in August. The annualized rate of September’s monthly gain was just 2.5%, a very pleasing figure for the Fed.

A topsy turvy jobs report like this one will leave a lot of people scratching there heads, including Fed Chair Jerome Powell. While early signs had pointed to a softening labor market, this report throws a wrench in that narrative. The frequent and directionally inconsistent revisions add another layer of complexity to the task of understanding the new data's impact on the economic landscape. However, amid all the uncertainty, one thing remains clear: there's no mass layoffs, and a recession in 2023 appears increasingly unlikely.