Job seekers at the Albany Job Fair held on Wednesday, October 2, 2024, in Latham, New York, USA.
Image credits: Angus Mordaunt | Bloomberg | Getty Images
The employment landscape for September is anticipated to closely mirror that of August. Hiring has been steadily decelerating since the year’s outset, wage growth has been sluggish, and the labor market aligns with the expectations of many financial policymakers.
According to Dow Jones Consensus, nonfarm payrolls are projected to increase by 150,000, slightly up from the previous month’s 142,000. The unemployment rate is expected to remain unchanged at 4.2%. Wage growth is forecasted at 0.3% month-over-month and 3.8% year-over-year, mirroring the annual rate seen in August.
If these anticipated figures materialize, it could indicate a stable economic environment, allowing the Federal Reserve the flexibility to proceed with interest rate reductions without risking economic downturn.
“The job market is easing and becoming less competitive,” stated Katie Nixon, chief investment officer at Northern Trust Wealth Management. “The dynamics are shifting back to employers, which should alleviate wage inflation, a major driver of overall inflation. We have been experiencing what resembles a soft landing for a while now.”
However, significant deviations in these forecasts are certainly possible. Additionally, monthly revisions can be substantial, as evidenced when the Labor Department previously exaggerated employment figures by over 800,000 jobs in the twelve months leading up to March 2024, adding complexity to the employment market evaluation.
“We are anticipating a rise of 150,000 jobs, but outcomes could easily swing to as low as 50,000 or as high as 250,000,” remarked David Kelly, chief global strategist at JPMorgan Asset Management. “Nonetheless, I don’t think there’s any reason to panic over these projections.”
The Bureau of Labor Statistics is set to publish its report at 8:30 a.m. There remains one nonfarm payroll report before the upcoming presidential election; however, October’s report is expected to be more reliable, as it won’t be impacted by events like the longshoremen’s strike or Hurricane Helen. Thus, September’s report is likely to be the last unblemished analysis before the election day.
Analyzing the Indicators
That said, the market will be closely monitoring the results of this report.
Particularly, stakeholders are keen to see if the Fed can gradually loosen its policies and lower interest rates akin to previous easing periods, or if it will have to resort to more drastic cuts of 0.5 percentage points. Signs of this will be specifically observed in the September report.
In the same meeting that approved the recent cuts, policymakers hinted that another cut of 0.5% (50 basis points) could happen by the end of 2024, followed by a potential full rate reduction in 2025. Nevertheless, the market seems to be favoring a more accelerated timeline.
“Even if the numbers come in stronger than expected, it won’t drastically alter our stance,” added Kelly from JPMorgan. “Conversely, weaker figures might necessitate another 50 basis point hike.”
However, Kelly emphasized that the Fed is likely to assess the employment landscape in a comprehensive context, not just through solitary data points.
The Broader Perspective
Indicators in the labor market have been trending downward for several months, but they are not collapsing into chaos. Federal Reserve Chairman Jerome Powell described the job sector as robust yet showing signs of softening earlier this week, while surveys in manufacturing and services indicate a slowdown in hiring activity.
Excluding a temporary dip during the early days of the pandemic, the current employment rates last witnessed similar figures this summer (3.3% of the labor force in June and August) were last reported in October 2013 when unemployment was at 7.2%, according to Labor Department data.
Job openings have also decreased markedly, with the ratio of available positions to unemployed individuals sinking from 2:1 a few years back to merely 1.1:1 now.
While the labor market was once affected by the Great Resignation, it appears to be stagnating as many workers leave their positions, believing they could find better offers elsewhere.
In terms of turnover, there hasn’t been a rate below the present 1.9% since December 2014. In fact, the last time turnover fell below the current 3.1%, taking the pandemic into account, was back in December 2012.
“As the economy transitions back to a pre-pandemic state, the influence workers once had seems to have faded,” mentioned Joseph Brusuelas, chief economist at RSM consulting. “This has led to a significant decrease in demand. We’re experiencing this shift in our business and receiving similar feedback from our clients.”
However, if someone had suggested four years ago during the pandemic that unemployment would hover around the low 4% mark and the economy could consistently add nearly 150,000 jobs monthly, Brusuelas commented, “I would have gladly treated you to a steak dinner.” ”
