How to make sense of the country's stunningly strong job market

People walk past a restaurant, with a hiring sign outside in Washington, D.C., on Oct. 5, 2023. Employers added 336,000 jobs in September, far more than what analysts had predicted. — People walk past a restaurant with a hiring sign outside in Washington, D.C., on Thursday.
Andrew Caballero-Reynolds | AFP via Getty Images

The job market is defying all odds.

U.S. employers added 336,000 jobs in September, according to the Labor Department. That’s about twice as many as forecasters were expecting.

The strong job growth is welcome news for anyone looking for work. But it could make the Federal Reserve’s effort to bring down inflation harder.

Here are four things to know about the monthly employment snapshot.

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The jobs engine is not slowing down

Instead of the slowdown that forecasters expected to see in the jobs numbers, hiring appears to be revving up. Not only did employers add an eye-popping number of jobs in September, but revised figures show that hiring was much stronger in July and August than had been reported.

Last month’s job gains were broad-based with nearly every industry adding workers.

Restaurants and bars added 61,000 jobs in September and are finally back to where they were before the pandemic. Health care and education also added tens of thousands of workers last month. Even factories and construction companies continued to hire, despite the strain of rising interest rates.

The job market has implications for the Fed

The Federal Reserve is keeping a close eye on the job market as it tries to decide whether to raise interest rates even higher, in an effort to control inflation.

At its last meeting in September, policymakers appeared to be leaning toward one more rate hike this year in their quest to bring prices under control.

The strong September employment report could be a worry, but it may not be all bad from the Fed’s perspective.

The main concern with hot labor market is that it could put upward pressure on wages, and threaten further inflation.

But despite the big job gains last month, wage growth remained modest. Average wages in September were up 4.2 percent from a year ago, and wages rose just 0.2 percent between August and September.

“Wage growth is cooling so this doesn’t look like an inflationary job market,” says Julia Coronado, president of MacroPolicy Perspectives. “It’s kind of Goldilocks, actually.”

The unemployment rate is still low

The unemployment rate held steady in September at 3.8 percent. While the jobless rate has inched up from earlier this year, it remains very low by historical standards.

The unemployment rate rose in August because hundreds of thousands of new people joined the workforce that month. That’s a good sign because it suggests people are optimistic about their job prospects. And with more people working, the economy can grow without putting upward pressure on prices.

A cautionary note: the unemployment rate for African Americans rose last month from 5.3 to 5.7 percent. That could be a statistical fluke. The number has bounced up and down a lot in recent months. But it’s something to keep an eye on.

Strike news won’t show up until next month

This jobs tally was conducted in mid-September, just before the United Auto Workers strike began, so it doesn’t reflect the 25,000 autoworkers who are on strike as of Friday morning, nor the several thousand additional workers who’ve been idled because of parts shortages tied to the strike.

The September snapshot was also taken before Hollywood writers ended their strike. Those changes could show up in the October jobs report.