Attendees of the Albany Career Fair in Latham, New York, United States, on Wednesday, October 2, 2024.
Angus Mordaunt | Bloomberg | Getty Images
The jobs picture for September is expected to look largely similar to August – a gradual slowdown in hiring since earlier this year, a modest increase in wages and a labor market that looks largely as many policymakers had hoped.
Nonfarm payrolls are expected to show growth of 150,000, from 142,000 the previous month, with a steady unemployment rate of 4.2%, according to the Dow Jones Consensus. On the pay side, expectations are for a 0.3% monthly increase and a 3.8% increase compared to last year – the annual rate is the same as in August.
If the numbers come in as expected, they will be close to a sweet spot that allows the Fed to continue cutting interest rates without a sense of urgency that it may be behind the curve and at risk of causing a recession.
“The job market is slowing down and becoming less tight,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “The balance of power has shifted back to employers and away from employees, and this will certainly ease wage pressure, which has been a major component of inflation. We have been on a soft ride for a while, and this is exactly what a soft landing looks like.”
Of course, there is always the possibility of a big surprise to the upside or downside of the numbers. Then there are the sometimes dramatic monthly revisions, which prompted the Labor Department to increase hiring by more than 800,000 jobs for the 12-month period through March 2024, adding uncertainty to job market analysis.
“As we look to add 150,000 jobs, I wouldn't be surprised if 50,000 jobs come in and I wouldn't be surprised if 250,000 jobs come in,” said David Kelly, chief global strategist at JP Morgan Asset Management. “I don't think people should feel terrible either way about that number.”
The Bureau of Labor Statistics will release the report at 8:30 a.m. While there will still be another nonfarm payrolls count before next month's presidential election, the October report is expected to be distorted by the dock workers' strike as well as Hurricane Helen. – Make September the last “clean” report before Election Day.
Looking for clues
However, markets will actually be watching the report closely.
Specifically, they will be looking for indications about whether the Fed will be able to ease policy and cut interest rates in a more gradual manner in line with previous easing cycles, or will have to repeat the dramatic half-percentage-point rate cut. Implemented in September.
At the same meeting where they approved the cut, policymakers signaled cuts of another half a percentage point, or 50 basis points, before the end of 2024 and another full percentage point in 2025. However, markets are pricing in a more aggressive timetable.
“A strong number won't really change their position,” JP Morgan's Kelly said. “A weak number could tempt them to another 50 basis points.”
However, Kelly said the Fed is likely to view the employment picture as a “mosaic” rather than just a single data point.
The bigger picture
Over the past few months, labor market indicators have been trending downward, although they are far from falling off a cliff. Manufacturing and services sector surveys pointed to a slowdown in hiring, while Federal Reserve Chair Jerome Powell earlier this week described the labor market as strong but declining.
Barring a brief recession at the start of the Covid pandemic, the last time the monthly employment rate reached the level seen this summer — 3.3% of the labor force in both June and August — was October 2013 when the unemployment rate was 7.2%. According to data from the Ministry of Labor.
Available job opportunities have also declined, pushing the ratio of available jobs to unemployed workers to 1.1 to 1, from 2 to 1 just two years ago.
However, a kind of recession has hit a labor market that not long ago was grappling with the “Great Quit” as workers quit their jobs en masse confident they could find better deals elsewhere.
Excluding pandemic fluctuations in 2020, the quit rate has not been lower than its current rate of 1.9% since December 2014, while the rate of breakups, even including Covid, was last lower than its current rate of 3.1% in December 2012. .
“Whatever leverage labor had has dissipated or declined as the economy returns to normal,” said Joseph Brusuelas, chief economist at tax consultancy RSM. “So we'll have a lot less turnover. We see that in our business. We hear that from our customers.”
However, if someone had told Brusuelas during the Covid turmoil four years ago that the economy would be adding roughly 150,000 jobs a month now with the unemployment rate in the low 4% range, he said, “I would have bought you a steak dinner.”
