In a significant boost to the US economy, September saw a surge in job growth with an addition of 336,000 nonfarm jobs, marking the fastest rate since early 2023 and doubling analysts’ projections. The unemployment rate held steady at 3.8%. This robust job growth, according to data released on Friday, could influence the Federal Reserve to raise its target rate further in an effort to control inflation by slowing down hiring and the broader economy.
The chances of a quarter-point rate hike at the Fed’s November meeting rose by about 10 points to 28% from last week, as indicated by the CME FedWatch tool. Over the past year, job growth averaged around 267,000 jobs monthly, exceeding the pre-pandemic monthly average of 190,000 jobs.
Several sectors witnessed significant gains in September. Leisure and hospitality added 96,000 jobs; government sectors grew by 73,000; health care increased by 41,000; manufacturing added 17,000; construction grew by 11,000; and oil and gas extraction added 200 jobs. On the other hand, mining excluding oil and gas lost 400 jobs. Motor vehicle and parts dealers gained 9,400 jobs; gasoline stations added 5,400 jobs; and transportation and warehousing added 8,600 jobs. Average hourly earnings rose by 4.2% over the past 12 months.
Meanwhile, Canada’s economy also surpassed forecasts in September by adding 64,000 jobs versus the estimated 20,000, while maintaining its unemployment rate at 5.5%, according to Statistics Canada. Canadian hourly wages rose by 5.3% year-on-year which outpaced the four per cent inflation rate and marked five consecutive quarters of real wage growth.
This strength in the labor market might intensify pressure on central bankers to address inflation more aggressively. Ryan Lewenza of Turner Investments and Dawn Desjardins from Deloitte Canada suggested that this robust labor market data, coupled with rising rents and other cost of living pressures affecting mortgage holders, could influence an interest rate hike. The Bank of Canada’s benchmark interest rate stands at five per cent, with its next decision due on Oct. 25.
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