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The nonfarm payrolls report for September released today morning shows that the US added 134,000 jobs during the month. That turns out to be a modest increase considering that most analysts had forecast the number to be in the range of 170,000 to 180,000.

While new job creation in September is below expectations, it has still managed to push the country’s unemployment rate to a historic low of 3.7%, which is the lowest since 1969. The average American worker’s hourly wage has risen 0.3% to $27.34 per hour.

The Labor Department also stated that the annual rate of hourly wage gains has slowed down to 2.8% (compared to the previous 9-year high of 2.9%). Weekly hours worked remained flat at 34.5 hours. 

Five Key Numbers that Stand Out in the Report

134,000

This is the total number of new jobs added to the nonfarm payrolls in September. The number represents the slowest pace since September 2017 when only 14,000 jobs were added.

3.7%

The unemployment rate in September was down two-tenths of a point from the previous month, and marked a historic low since December 1969, when the unemployment level had gone down to 3.5 percent.

87,000

The numbers for July and August were revised considerably higher, with 69,000 jobs added in August. This is the year’s biggest upward adjustment and reinforces the belief that the labor market continues to be robust despite September’s below-expectation numbers.

263,000

The number of individuals working part-time (also known as under-employed or involuntary part-time workers) grew substantially during September. By some estimates this number accounts for a higher “real” unemployment rate of 7.5%.

2.8%

Analysts focus on this number for good reason, which represents the increase in average hourly wages. This number was largely in line with the expectations of the market, and does not reveal any signs of serious wage pressure as of now.

Four Important Takeaways from the Report

1. The labor market at the moment is very tight. Unemployment continues to decline, touching its lowest level in nearly half a century. According to analysts, the strong revision of previous months’ numbers significantly offset a relatively lower pace of hiring in September.
2. It is still not clear how the numbers for September may have been influenced by Hurricane Florence. While employment in a few industries may have been impacted, the Labor Department has not been able to quantify the impact. This aspect should be considered when analyzing the data going forward.
3. Probably the most crucial takeaway for many investors is that the Fed is likely to stay on the gradual path of increasing interest rates. Some analysts expect the Federal Reserve to keep moving at a stable pace, increasing rates in December and a few times during the first two quarters of 2019 because the economy is so strong as a result of lower taxes and fewer regulations.
4. The upcoming inflation indicators are going to be worth a close look. While the growth in wage rates continues to be reasonably contained, it may well top three percent for the year. With the rising oil prices and a lot of companies watching their costs very closely, the forthcoming earnings and overall economic data will prove critical for the markets in October and November.

How the Jobs Report Impacts the Fed’s Interest Rate Path?

What does the jobs data mean for the central bank and the Federal Reserve’s interest rate path? As the concerns about rising inflation gather strength, questions have arisen whether the Fed may have to increase rates faster in order to prevent the overheating of the economy.

However, in the wake of the September data, some experts don’t seem to be too worried. According to Gibson Smith of Smith Capital Investors, the greater concern is about the balance sheet of the Fed. Smith believes the Fed is going to go steady and allow the markets to do their work for them.

However, the market is not remaining immune to the low unemployment rates of September. Smith says that as unemployment rates continue to drop, it will ignite inflation expectations, particularly on the wage front. That is surely going to keep the Fed on their toes.

Manufacturing, Healthcare, and Construction Going Strong

While the job data shows that hiring has cooled down generally during September, the report highlights that manufacturing, healthcare, and construction businesses continue to be the bright spots in the overall economy.

Employment in construction as well as healthcare surpassed 20,000 jobs in September, and has already topped 300,000 for the past year. The manufacturing sector has added 18,000 jobs, and achieved an increase of 278,000 jobs in the past year, riding on the strong growth in durable goods industries.

Hospitality and leisure and retail are two sectors that could be vulnerable to bad weather and lost jobs.

Gold Remains Largely Unaffected

Following the release of the job report, gold prices saw little change during the morning US trade on Friday. December gold futures were seen last up $2.80 at $1,204.30 an ounce, and December Comex silver was seen last up $0.06 an ounce at $14.645.

Final Thoughts

With almost no doubt in the minds of investors that labor market is robust, the question that market participants now face is whether this strength in jobs growth will lead to higher wage rates and thus higher inflation.

That would have a more visible impact on the markets, currency rates, and gold prices. This question has not been settled with September’s job data, but the next months’ figures might shed more light.