U.S. Labor Market Widely Surpasses Expectations in September

U.S. employers picked up the pace of hiring in September, while the unemployment rate dropped for a second straight month. Hiring among U.S. employers was much stronger than expected and upward job revisions were made for July and August. The surge in hiring came amid the Federal Reserve’s interest rate cut of half a percentage point in September, the first rate cut in four years.

Employers added roughly 254,000 workers to payrolls in September 2024, according to a survey of businesses by the Bureau of Labor Statistics. Those additions came in higher than the 159,000 jobs gained in August (which was revised up) and were well above what economists were forecasting (+140,000 jobs to +150,000 jobs). The U.S. economy has now added jobs for 45 consecutive months, the fifth-longest period of job base expansion on record dating back to 1939.

Of note, the job counts for July and August were revised up. Upward revisions to July 2024 data showed 55,000 more jobs were added than previously reported, up to 144,000 positions. The August 2024 job growth number was revised up by 17,000 jobs to a total of 159,000 positions. With these revisions, employment gains in July and August combined were 72,000 jobs higher than previously reported.

Job gains in September were higher than the monthly average of around 203,000 jobs added over the previous 12 months and came in well above pre-pandemic norms. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month.

On an annual basis, the nation gained roughly 2.44 million jobs as of September 2024. That was second-weakest annual gain since April 2021 but registered slightly above the pre-pandemic average of around 2.4 million jobs added annually from 2015 to 2019.

The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of September, the nation had nearly 6.8 million more jobs (+4.5%) compared to the pre-pandemic employment level from February 2020.

Jobs by Industry

 All but one of the 11 major industry sectors gained jobs in September. The most notable job base expansions were in Education and Health Services (+81,000 jobs) and Leisure and Hospitality Services (+78,000 jobs). Notable gains were also recorded in Government (+31,000 jobs) and Construction (+25,000 jobs). Smaller gains were seen in Professional and Business Services (+17,000 jobs), Trade, Transportation and Utilities (+13,000 jobs), Financial Activities (+5,000 jobs), Information (+4,000 jobs), Other Services (+4,000 jobs) and Mining and Logging (+3,000 jobs). The only net job losses in September were recorded in Manufacturing (-7,000 jobs).

Most major industries have recovered all the jobs lost during the COVID-19 pandemic downturn. Education and Health Services has seen the best recovery, with the September 2024 job count coming in roughly 1.97 million positions ahead of February 2020 numbers, followed by Professional and Business Services (+1.55 million jobs). Also well ahead of pre-pandemic norms was Trade, Transportation and Utilities (+1.32 million jobs).

The Leisure and Hospitality Services sector, which was the hardest-hit industry during the pandemic, has recouped all the jobs lost during that downturn. As of September, that sector had 176,000 more jobs than in February 2020, but that was just a 1% increase in the job base.

The Mining and Logging and Other Services sectors have yet to recover all the jobs lost during the COVID-19 downturn. The Mining and Logging industry was 45,000 jobs below its February 2020 level, while Other Services was 23,000 jobs in the hole as of September 2024. That put the September employment count in Other Services 0.4% below the pre-pandemic level, while the job base in Mining and Logging was 6.6% below the February 2020 level.

Unemployment

The unemployment rate (the U3 or headline unemployment rate, which is seasonally adjusted, and is a survey of households) has fallen for two consecutive months. From August to September, the unemployment rate fell 10 basis points (bps), following a 10-bps decline from July to August, with the rate registering at 4.1% as of September. While that was slightly higher than the previous 12-month average of 3.9%, it came in below economists’ expectations (4.2%). The decline in the unemployment rate came amid a labor force participation rate that was essentially unchanged from August to September at 62.7%, as only 150,000 more people entered the labor force which had a negligible impact on that rate. 

The unemployment rate registered below 4% from February 2022 to April 2024, averaging 3.6% during that period. At the onset of the pandemic, the unemployment rate climbed to 14.8% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that five-year period. Prior to 2023, the unemployment rate hadn’t registered below 3.5% since 1969.

The total number of unemployed persons in the U.S. registered at roughly 6.83 million in September, down from about 7.12 million in August.

The unemployment rate for adult men (20 years and over) declined 30 bps from August to September, registering at 3.7%. The unemployment rate for adult women (20 years and older) fell 10 bps to 3.6%. Meanwhile, the unemployment rate for teenagers (16 to 19-year-olds) rose 20 bps, from 14.1% in August to 14.3% in September.

Average Hourly Earnings

Average hourly earnings among employees on private nonfarm payrolls rose $0.13 (+0.4%) from August to September. That monthly increase took average hourly earnings to $35.36 in September. On an annual basis, average hourly earnings were up $1.35, a 4% increase year-over-year. Overall wage growth continues to surpass rising prices, as the Consumer Price Index rose 2.5% annually in August. The Fed’s target for inflation is currently at 2%.

Wage growth over the past year was strong across most major industries. The largest increases in earnings from September 2023 to September 2024 were recorded among workers in Manufacturing (5%), Professional and Business Services (5%), Construction (4.6%), Leisure and Hospitality Services (4.3%) and Financial Activities (4.2%). Smaller increases were among employees in Trade, Transportation and Utilities (2.8%), Education and Health Services (3.1%), Mining and Logging (3.5%), Information (3.6%) and Other Services (3.6%).