The strong September US jobs report spooked the markets with the rising prospect of yet another interest rate hike by the Federal Reserve before the end of this year. But one indicator suggests the Fed still has reason to hold back.
Average hourly wage earnings grew just 0.2% for the month and 4.2% from a year ago, according to the US Bureau of Labor Statistics. This was marginally below economists’ average forecast for increases of 0.3% and 4.3% respectively.
Nonfarm payrolls added a stunning 336,000 jobs in September, much higher than the expected 170,000 from the Dow Jones consensus. The unemployment rate was unchanged from the previous month at 3.8%.
According to Nick Bunker, head of economic research at job site Indeed, the slowdown in wage growth is the key trend in the report.
“The recent wage data should reduce concerns about wage growth defying gravity—on a 3-month annualized basis, wages are growing at a 3.4% rate, which is near what we saw in 2019,” Bunker said in a statement.
This means that while there is still a strong demand for workers, employers are not hiking wages as rapidly to be able to attract talent.
Restaurant and bar jobs are back at pre-pandemic levels
The addition of 61,000 jobs in the restaurant and bar industry
closes another chapter in America’s economic recovery from the covid-19 pandemic. Restaurants and bars now account for 12.37 million jobs, up from 12.34 million in February 2020, before widespread shutdowns and layoffs that wiped out half the jobs in the industry within two months.
Count on the doomsayers to be out warning of an unsustainable economy, with fears of elevated rate hikes. But Bunker says to take a step back and consider the underlying trends.
“Hiring has moderated from recent highs and there’s capacity to pull more workers into the labor force while wage growth is moderating,” wrote Bunker.
“This is good news. Take it as such.”
The stock market seems to be following this advice, with the Standard & Poor’s 500 Index up nearly 0.9% in midday trading to 4,294.88.