| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 160,000 | 105,000 to 235,000 | 336,000 | 187,000 | 227,000 |
| Unemployment Rate | 3.7% | 3.6% to 3.9% | 3.8% | 3.8% | |
| Private Payrolls - M/M | 150,000 | 100,000 to 200,000 | 263,000 | 179,000 | 177,000 |
| Manufacturing Payrolls - M/M | 5,000 | 2,000 to 10,000 | 17,000 | 16,000 | 11,000 |
| Participation Rate | 62.8% | 62.8% to 62.8% | 62.8% | 62.8% | |
| Average Hourly Earnings - M/M | 0.3% | 0.2% to 0.4% | 0.2% | 0.2% | |
| Average Hourly Earnings - Y/Y | 4.3% | 4.2% to 4.3% | 4.2% | 4.3% | |
| Average Workweek | 34.4hrs | 34.3hrs to 34.4hrs | 34.4hrs | 34.4hrs |
Highlights
Nonfarm payrolls are up 336,000 in September after a net upward revision of 119,000 to the prior two months. The September level outstrips the consensus of up 160,000 in the Econoday survey of forecasters. Private payrolls are up 263,000 in September and government jobs are up 73,000. The monthly average increase for the third quarter 2023 is 226,000, stronger than the up 201,000 in the second quarter, and not far below 312,000 in the first quarter.
The big upside surprise should be read with caution. It is only one month's data. However, it provides Fed policymakers with more evidence that the labor market remains strong in the face of restrictive monetary policy, and that even if no more rate hikes are in the works, monetary policy can remain restrictive for some time yet.
Much of the September private service sector payroll increase of 234,000 is due to a rise of 96,000 in leisure and hospitality which accounted for over 40 percent of jobs added. Goods-producers' payrolls are up 29,000 in September with gains of 11,000 in construction and 17,000 in manufacturing. Much of the increase in government jobs is for education with 29,100 at the state level and 10,800 at the local level. However, state government excluding education added 26,600 jobs as well.
While month-over-month wages are up 0.2 percent in September, the year-over-year rate is up 4.2 percent, only a slightly softer pace than 4.3 percent in August, although it is the lowest since 3.9 percent in June 2021. Some of this likely reflects hiring in some of the lower wage industries where competition for workers is still active, including retailers seeking workers for the upcoming winter shopping season.
The unemployment rate is unchanged at 3.8 percent in September from August. The U-6 unemployment rate is down a tenth to 7.0 percent in September. The labor participation rate is unchanged at 62.8 percent in September. The size of the labor force is not much changed in September at up 90,000 to 167.929 million with the number of employed up 86,000 and unemployed up 5,000.
Those working part-time for economic reasons are down 156,000 to 4.065 million in September, an indication that at least some workers are finding full-time employment. Job losers are down 56,000 to 2.858 million, reflecting the low levels of layoff activity. Job leavers are essentially the same at down 4,000 to 797,000 in September, a sign of less churn in the labor market. It appears that many college graduates entered the labor market in August and partly accounted for the new entrants decrease of 29,000 to 568,000.
The big upside surprise should be read with caution. It is only one month's data. However, it provides Fed policymakers with more evidence that the labor market remains strong in the face of restrictive monetary policy, and that even if no more rate hikes are in the works, monetary policy can remain restrictive for some time yet.
Much of the September private service sector payroll increase of 234,000 is due to a rise of 96,000 in leisure and hospitality which accounted for over 40 percent of jobs added. Goods-producers' payrolls are up 29,000 in September with gains of 11,000 in construction and 17,000 in manufacturing. Much of the increase in government jobs is for education with 29,100 at the state level and 10,800 at the local level. However, state government excluding education added 26,600 jobs as well.
While month-over-month wages are up 0.2 percent in September, the year-over-year rate is up 4.2 percent, only a slightly softer pace than 4.3 percent in August, although it is the lowest since 3.9 percent in June 2021. Some of this likely reflects hiring in some of the lower wage industries where competition for workers is still active, including retailers seeking workers for the upcoming winter shopping season.
The unemployment rate is unchanged at 3.8 percent in September from August. The U-6 unemployment rate is down a tenth to 7.0 percent in September. The labor participation rate is unchanged at 62.8 percent in September. The size of the labor force is not much changed in September at up 90,000 to 167.929 million with the number of employed up 86,000 and unemployed up 5,000.
Those working part-time for economic reasons are down 156,000 to 4.065 million in September, an indication that at least some workers are finding full-time employment. Job losers are down 56,000 to 2.858 million, reflecting the low levels of layoff activity. Job leavers are essentially the same at down 4,000 to 797,000 in September, a sign of less churn in the labor market. It appears that many college graduates entered the labor market in August and partly accounted for the new entrants decrease of 29,000 to 568,000.
Market Consensus Before Announcement
A 160,000 rise is the call for nonfarm payroll growth in September versus 187,000 in August which was nearly 20,000 better than expected. Average hourly earnings in September are expected to rise 0.3 percent on the month for a year-over-year rate of 4.3 percent; these would compare with 0.2 and 4.3 percent in August and 0.4 and 4.4 percent in both of the two prior reports. September's unemployment rate is expected to edge lower to 3.7 percent from August's 3.8 percent which was much higher than Econoday's consensus for 3.5 percent.
Definition
The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Description
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
