The US economy added 336,000 jobs in September — a surprising surge that raises the risk that the Federal Reserve will further tighten interest rates to tamp down inflation.
The blowout number was nearly double the 170,000 jobs economists had expected, and also sharply higher than an upwardly revised 227,000 jobs added in August, according to fresh data released by the Bureau of Labor Statistics on Friday.
The report also showed that wage increases were smaller than expected and the unemployment held steady at 3.8% — slightly above the 3.7% forecast and even with the jobless rate in August, which had been up slightly from 3.5% in July.
Wall Street shook off the potentially ominous data, with the Dow rallying 0.9% to close nearly 300 points higher on the day.
Markets were spooked earlier this week, falling more than 1%, when the Labor Department released its Job Openings and Labor Turnover Summary, which showed job openings increased to 9.61 million in August — up from 8.9 million in July.
“You have an economy that’s moving forward, the Federal Reserve is probably sitting on the sidelines and oil prices are not working against you today. You have a stock market that’s extremely oversold,” said Rober Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
Fed officials have said they think strong hiring can often fuel inflation if companies feel compelled to raise pay to attract and keep workers, making it more difficult for the Fed reach its 2% inflation target without further hiking interest rates.
Market watchers have been weighing whether the Federal Reserve may be done hiking interest rates because of a recent surge in long-term US Treasury yields. The central bankers are scheduled to meet in early November.
In Friday’s report, leisure and hospitality led gains with 96,000 new jobs. Other big additions came in government, health care and professional, scientific and technical services.
“This will keep the Fed very guarded and very much concerned about upside risk,” Luke Tilley, chief economist at Wilmington Trust Corp, told Bloomberg, “because this plays into their concerns about a reacceleration in the economy.”
Private-sector jobs, however, added a mere 89,000 jobs in September, according to an ADP on Wednesday — well below the 153,000 advance in private-sector hiring economists anticipated.
The latest Consumer Price Index — a closely-watched measure of inflation that tracks changes in the costs of everyday goods and services — rose a stiff 3.7% in August.
Rising gasoline costs were blamed for the surprising acceleration. Gas ticked 10.6% higher in August, the CPI report showed, accounting for over half of the increase.
However, the 3.7% figure still represents a stark slowdown from last summer when inflation hit a four-decade peak at 9.1%. Still, it remains well above the Fed’s 2% goal and marks an acceleration from the previous two months. In June, inflation bottomed out at 3%, and rose to 3.2% in July.
The next CPI will be released on Oct. 12.
Fed Chair Jerome Powell has said that central bankers will be taking a “data-dependent approach” moving forward, leaving more interest rate hikes before year’s end up in the air.
The central bank has worked to bring down stubbornly high inflation by hiking rates another 25 basis points to a 22-year high in August in hopes of an economic slowdown.
The benchmark federal funds rate currently sits between 5.25% and 5.5%. Last month, Fed officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year.
“The US banking system is sound and resilient,” the Fed said last month in a statement that was minimally changed from remarks following its July meeting.
The Fed noted that the economy has been expanding at a “solid” pace — an update from a “moderate” pace.
Though consumers have continued to feel a reprieve from the Fed’s aggressive tightening regime, the labor market has shown surprising resiliency over the last couple of months.
Employers have only recently begun to slow hiring.
Thanks to a strong labor market, the US economy has avoided a downturn, and even the Fed has said it’s no longer predicting the economy will slip into a recession by the end of the year.
The JOLTS report — which provides overall data for hiring, job postings and the number of people quitting their jobs — fueled worries the Fed may need to keep interest rates high to tamp down the resilient job market, and sent the Dow careening to its worst day since May.
With Post wires
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