Kiplinger Jobs Outlook: Job Growth Surprisingly Strong in September
Pent-up labor demand will likely keep the economy out of recession.
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The labor market is more robust than previously believed. 336,000 jobs were added in September and 119,000 jobs were retroactively added to July and August’s total. The wholesale retail sector bounced back with a 31,000 gain in September, and the leisure and hospitality sector added a hefty 96,000 positions. State and local governments increased employment by 67,000, and health care by 41,000. Truck transportation has started recovering from the Yellow bankruptcy by adding 9,000 new jobs.
Job growth is being bolstered by significant pent-up labor demand, particularly in services. Professional and technical, health care, social assistance, education, sports and recreation, food service and accommodation industries have all been buoyant.
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There were a few signs of slowing: particularly, the eighth consecutive monthly decline in temporary help, which is used heavily by manufacturers to add overtime shifts. Also, there is no growth in manufacturing payrolls, outside of motor vehicles. (The United Auto Workers strike had not happened yet at the time of the September survey.)
The unemployment rate stayed at 3.8% in September. It is likely to stay at that level for a few months because layoff activity does not appear to be increasing at the moment.
Wage growth eased in September to 4.2%, and the easing appears to be a trend. Wage growth is coming down slowly, but the downtrend is real. Average hourly earnings growth in August and September was much below the previous months. We expect that the annual rate will be just under 4.0% by the end of the year. However, wage growth should slow to near 3% by the end of 2024.
The Federal Reserve likely welcomes the easing in wage growth, but the strong job gain in September may lead the Fed to raise rates at their next meeting on November 1. We think they will stand pat, but unfortunately, the Fed’s meeting will be two days before October employment data is released, so they will have to guess at whether the strong September reading was an anomaly or a trend. If they do hike, it should be the last hike, as greater slowing in the economy ought to be evident by the end of the year.
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David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.
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