A blockbuster jobs report far exceeded expectations. Here’s what it means.

U.S. economy added 336,000 jobs last month, roughly doubling expectations.

October 6, 2023, 2:22 PM

A blockbuster jobs report on Friday showed that employers added 336,000 jobs in September, exceeding economist expectations by nearly twofold and reversing a monthslong hiring slowdown.

The unemployment rate held steady at 3.8%, a historically low figure, government data showed.

The added jobs came across a range of professions from leisure and hospitality to healthcare to tech, indicating enthusiasm among employers across various swathes of the U.S. economy.

A Wells Fargo research note on Friday summed up the news with a one-word title: "Wow."

The robust hiring suggests that businesses remain willing to add workers, despite an aggressive series of interest rate hikes over the past year that has sought to dial back inflation by cutting demand and slowing down the economy.

The hot jobs market aligns with renewed optimism among many observers that the U.S. could avert a recession, achieving a "soft landing" in which price increases return to normal levels while the economy continues to grow.

In early trading on Friday, each of the three major stock market indexes ticked up roughly 1%.

Speaking at the White House on Friday, President Joe Biden attributed the latest jobs data to a set of economic policies that he has labeled "Bidenomics."

"We're growing the economy from the middle out, the bottom up," Biden said. "Not the top down."

However, the good economic news may pose a difficulty for the Federal Reserve as it tries to cool the economy and slow down price increases.

Inflation stands well below its peak last summer of over 9% but remains more than a percentage point higher than the Federal Reserve's target rate.

Federal Reserve Chairman Jerome Powell holds a press conference in Washington, D.C., Sept., 20, 2023.
Mandel Ngan/AFP via Getty Images, FILE

Bond yields rose on Friday as traders feared that a hot economy would require the Federal Reserve to further raise interest rates or at least keep rates elevated for a longer period of time.

The September jobs report "fanned the flames that the FOMC may hike the federal funds rate one more time at one of its two remaining meetings of the year," Wells Fargo analysts said, referring to the Federal Open Market Committee, the Fed's decision-making body on interest rates.

An additional interest rate hike would make borrowing costs more expensive, pressing the brakes on economic activity.

While the breakneck hiring could alarm central bankers, a simultaneous moderation of wage growth shown by the data on Friday could alleviate fears of upward pressure placed on prices in the event of a sharp rise in worker pay.

Wages increased 4.2% on an annual basis last month, exceeding the inflation rate but falling well below the 6% pace recorded in March, data showed.

When facing high inflation, policymakers worry about what's referred to as a price-wage spiral, in which a rise in prices prompts workers to demand raises that help them afford goods, which in turn pushes up prices, leading to a self-perpetuating cycle of runaway inflation.

Julia Pollak, chief economist at ZipRecruiter, rejected such concerns in a statement on Friday, saying the jobs report held near-uniform good news for the economy.

"It is hard to find any bad news in this report, despite what some observers are suggesting," Pollak said.

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