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Last week we had the release of two critical labor market reports: the Job Openings and Labor Turnover Survey (JOLTS) and the BLS Employment Situation Report. The results were mixed and, in some cases, surprisingly strong particularly following the Fed’s big cut in which they explained was due to weakening employment.
The JOLTS report showed that job openings rose significantly in August, reaching 8.04 million, a 329,000 increase from the upwardly revised July report. The job openings rate also ticked up to 4.8%, a positive sign for labor demand. However, hiring activity slowed in August, with total nonfarm hires falling by 99,000 to 5.3 million. This decline in hiring suggests that while employers are still seeking workers, they may be more selective or may have some challenges filling roles.
The quits rate, often considered a measure of worker confidence, dropped slightly to 1.9%, which could indicate employees are starting to be hesitant to switch jobs, potentially due to economic uncertainty. Layoffs also decreased, pointing to a relatively stable job market, though certain industries, like transportation and utilities, did have notable reductions in hiring.
While the JOLTS report was mixed and continues to show that the labor market overall is still on a trend of normalizing, the real surprise came from the Employment Situation Report, which came in substantially stronger than anticipated in September. There were 254,000 jobs added for the month, handily surpassing expectations of only 132,500 new jobs. This was also a big jump from August, even after an upward adjustment to 159,000 jobs. This growth was mostly concentrated in healthcare, education, and government sectors, signaling continued strength in those sectors.
In other areas of the report, the unemployment rate fell to 4.1%, down slightly from 4.2% in August, and the labor force participation rate was unchanged at 62.7%.
Overall, the labor market is continuing to normalize even as there are mixed signals between rising job openings and slowing hires. However, the rhetoric from the Fed has recently been concern over the degree of softening in employment, leading them to execute a large 50 basis point cut in the target Fed Funds rate. As such, the big jump in new payrolls and reduction, however slight, in the unemployment rate came as a surprise as the Fed uses these numbers when determining interest rate policy. It is possible this was simply an outlier and several economic factors like ongoing labor strikes and external shocks, such as Hurricane Helene, could further complicate the outlook in the months ahead, so it will be important to follow the trend over the next few months.