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The U.S. labor market posted an unexpectedly strong rebound in September, reviving growth optimism and casting fresh uncertainty over whether the Federal Reserve will deliver another rate cut in December.
Non-farm payrolls jumped by 119,000 in September, according to the official labor report released Thursday after a six-week delay due to the government shutdown.
Despite the hiring pickup, the unemployment rate edged up from 4.3% to 4.4%—marking the highest level since October 2021.
Average hourly earnings rose 0.2% from the previous month, falling short of the 0.3% forecast. On a yearly basis, however, wages edged up to 3.8%, up from 3.7% in August.
Health care led the job growth, adding 43,000 positions—primarily in ambulatory services, up 23,000, and hospitals, up 16,000. Food services and drinking places added another 37,000, while social assistance gained 14,000 jobs, driven by individual and family services, up 20,000.
By contrast, transportation and warehousing shed 25,000 jobs, with warehousing and storage down 11,000 and couriers and messengers falling by 7,000. Federal government employment also declined by 3,000 in September and has lost 97,000 positions since peaking in January.
In parallel reports, the Department of Labor showed no significant increase in weekly unemployment claims.
Initial claims for the week ending Nov. 15 came in at 220,000, below the prior week's 228,000. The four-week moving average held near 224,250, reinforcing the view that layoffs remain contained.
However, continuing jobless claims, which track the number of people receiving ongoing unemployment benefits, climbed to 1.974 million in the week ending Nov. 8, up from 1.946 million the prior week.
The better-than-expected employment report further dampened expectations for a Federal Reserve rate cut at the December meeting. According to Fed fund futures, the probability of a 25-basis-point cut dropped to 30%, while markets are pricing in a 70% chance that rates remain on hold at 3.75%-4.00%.
Market-implied expectations of a 25-basis-point interest rate cut further shrank following the release of the September jobs report, with Fed futures currently pricing in only a 28% chance versus a 72% of holding rates steady at 3.75%-4.00%.
Before the September jobs report, markets priced in a 35% chance of a rate cut—just a week earlier, odds were split 50-50.
Markets reacted positively to the data, interpreting it as a signal that labor market fears may be overstated.
Futures on major U.S. indices soared in premarket trading. Contracts on the Nasdaq 100 jumped 2.2%, while S&P 500 futures rose 1.6%, fueled by Nvidia Corp. (NASDAQ:NVDA)‘s blockbuster earnings results and upbeat guidance.
Super Micro Computer Inc. (NASDAQ:SMCI), Nvidia and Palantir Technologies Inc. (NASDAQ:PLTR) were the strongest performers within the S&P 500, up 6%, 5%, and 4.5% respectively.
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Image created using artificial intelligence via Midjourney.
