Experts predict that job growth in the United States likely slowed in September, while wage growth remained steady. This reflects the gradual return of the labor market to its pre-pandemic state.
According to consensus expectations from FactSet, economists anticipate the addition of 163,000 jobs in September. Although this figure marks a decline from August’s surprisingly robust pace of 187,000 jobs, it still showcases a healthy labor market. The unemployment rate is also expected to decrease by 0.1 percentage point, reaching 3.7%.
Job growth has been gradually moderating from the exceptional levels seen during the post-Covid recovery period. However, it continues to outpace population growth, maintaining a solid foundation for the economy. The three-month average in job growth would hover around 170,000, slightly below the pre-pandemic monthly average of approximately 190,000 jobs added.
There is a possibility that the September report may not meet expectations. A recent report from payroll processor ADP revealed that only 89,000 private-sector jobs were created last month, falling short of the anticipated 160,000.
A potential slowdown in employment growth, as indicated by the official government data, may be seen as positive news by the Federal Reserve. The central bank has long sought a softer labor market to help curb inflation. However, it also raises concerns about the possibility of further slowdowns and a potential recession.
Steven Kyle, an associate professor at Cornell University specializing in macroeconomic policy and finance, emphasizes the potential impact of the Fed’s rate increases on the labor market. He states, “If the jobs report confirms this initial reading of the data, then it will be clear that the Fed’s rate increases are starting to have a visible effect in the labor market.”
Despite these concerns, most other indicators point to ongoing strength in the labor market, albeit at a slower pace compared to the record highs observed previously.
Job Openings Surge as Labor Demand Increases
The latest data on job openings indicates a significant boost in labor demand. In August, job openings skyrocketed to 9.6 million, surpassing the 8.9 million recorded the previous month.
Unemployment rates remain close to their record low, while applications for unemployment insurance have stabilized at pre-pandemic levels. A recent report highlighted that jobless claims reached an eight-month low in September, coinciding with data collection for the jobs report.
Moreover, the labor force participation rate has been on the rise in recent months. This upward trend contributes to alleviating tightness in the job market by increasing the supply of workers. The share of individuals in their prime working years who are either employed or actively seeking work was at 83.5% in August, rebounding from the 83% level it stood at just before the onset of the pandemic.
Wages have also remained steady. Economists anticipate a 0.3% increase in average hourly earnings for September, following a 0.2% rise the previous month. This would align with the 4.3% annual pace of earnings growth observed in August.
However, it is crucial to keep an eye on revisions in September’s data. Previous jobs reports have undergone significant downward adjustments, suggesting that job growth may have been more subdued than initially reported.
Skanda Amarnath, Executive Director at Employ America, suggests that September’s report may show some “idiosyncratic snapback” as the impact of the Yellow bankruptcy, which hampered employment growth in August, fades away.
The Labor Department is set to release the September jobs data on Friday at 8:30 a.m.