U.S. jobs report beats expectations as economy adds 254,000 jobs and unemployment rate falls to 4.1%

The U.S. labor market added far more jobs than expected in September, while the unemployment rate fell unexpectedly, reflecting a stronger labor market picture than Wall Street had expected.

Bureau of Labor Statistics data released Friday showed the labor market added 254,000 jobs in September, more than the 150,000 economists expected.

At the same time, the unemployment rate fell to 4.1%, compared to 4.2% in August. Job creation in September was higher than the 159,000 created in August. Revisions to the July and August reports showed that the U.S. economy added 72,000 more jobs in those two months than previously reported.

Wage growth, an important measure for gauging inflationary pressures, rose to 4% year-on-year, following a 3.9% annual gain in August. On a monthly basis, wages increased by 0.4%, in line with August figures.

The key question addressed in Friday's report was whether the data would reflect a significant cooling in the labor market, which could lead to another significant cut in interest rates from the Fed. Robert Sockin, senior global economist at Citi, told Yahoo Finance that the better-than-expected jobs report makes it less likely that the Fed will act with the “urgency” it did at its September meeting when the central bank cut interest rates by half a percentage point. .

“It's putting a lot of pressure on the Fed to exit,” he said, adding that it's unclear whether the Fed will make another 50 basis point cut this year.

Read more: Jobs, inflation and the Fed: how they are all linked

Following the report's release, markets were pricing in a roughly 5% chance the Fed would cut interest rates by half a percentage point in November, up from a 53% chance seen a year ago. a week, according to the CME FedWatch tool.

“Given the strength of the labor market evident in the September jobs report, the real debate at the Fed should be over whether to ease monetary policy,” wrote Paul Ashworth, chief economist at Capital Economics for North America, in a note to its clients on Friday. “Any hope of a [50 basis point] the cuts are long gone.”

Futures contracts linked to major US stock indices rallied following this news. S&P 500 futures (ES=F) rose nearly 0.8%, while Dow Jones Industrial Average futures (YM=F) rose about 0.5%. Contracts on the technology-heavy Nasdaq 100 (NQ=F) rose 1.1%.

Neil Dutta, economic director at Renaissance Macro, wrote in a note following the release that the September jobs report was “undeniably good news” for the stock market.

“Ultimately, the Fed continues to cut policy rates even as the economy grows,” Dutta wrote.

The story continues

Also in Friday's report, the activity rate remained stable compared to the previous month, at 62.7%. Food services and drinking places led the employment growth, increasing by 69,000 during the month. During this time, the health sector added 45,000 jobs and government jobs increased by 31,000.

Earlier this week, ADP data showed the private sector added 143,000 jobs in September, higher than economists' estimates of 125,000 and significantly higher than the 99,000 recorded in August. This marked the end of a five-month decline in private sector job creation.

“This is a pretty healthy, broad-based rebound,” said Nela Richardson, ADP’s chief economist. “And probably unexpected for a lot of people who thought the job market was down. This month, of course, is sobering on those kinds of assessments. Hiring is still strong.”

Construction workers work on the roof of a house under construction in Alhambra, California, September 23, 2024. (FREDERIC J. BROWN/AFP via Getty Images) (FREDERIC J. BROWN via Getty Images)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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