US job growth surges in September as unemployment rate falls

US job growth accelerated in September and the unemployment slipped to 4.1 percent, further reducing the need for the Federal Reserve to maintain large interest rate cuts at its remaining two meetings this year.

Nonfarm payrolls increased by 254,000 jobs last month after rising by an upwardly revised 159,000 in August, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday.

Economists had forecast payrolls rising by 140,000 positions after advancing by a previously reported 142,000 in August.

The initial payrolls count for August has typically been revised higher over the past decade. Estimates for September's job gains ranged from 70,000 to 220,000.

The labour market slowdown is being driven by tepid hiring against the backdrop of increased labour supply stemming mostly from a rise in immigration. Layoffs have remained low, which is underpinning the economy through solid consumer spending.

Average hourly earnings rose 0.4 percent after gaining 0.5 percent in August. Wages increased 4.0 percent year-on-year after climbing 3.9 percent in August.

The unemployment rate dropped from 4.2 percent in August. It has jumped from 3.4 percent in April 2023, in part boosted by the 16-24 age cohort and the rise in temporary layoffs during the annual automobile plant shutdowns in July.

The US central bank's policy-setting committee kicked off its policy easing cycle with an unusually large half-percentage-point rate cut last month and Fed Chair Jerome Powell emphasised growing concerns over the health of the labour market.

Brief turbulence

While the labour market has taken a step back, annual benchmark revisions to national accounts data last week showed the economy in a much better shape than previously estimated, with upgrades to growth, income, savings and corporate profits.

This improved economic backdrop was acknowledged by Powell this week when he pushed back against investors' expectations for another half-percentage-point rate cut in November, saying "this is not a committee that feels like it is in a hurry to cut rates quickly."

The Fed hiked rates by 525 basis points in 2022 and 2023, and delivered its first rate cut since 2020 last month. Its policy rate is currently set in the 4.75 percent-5.00 percent band.

Early on Friday, financial markets saw a roughly 71.5 percent chance of a quarter-point rate reduction in November, CME's FedWatch tool showed. The odds of 50 basis points cut were around 28.5 percent.

The labour market, however, is likely to experience some brief turbulence after Hurricane Helene devastated large swathes of the US Southeast last week.

Tens of thousands of machinists at Boeing also went on strike in September, with ripple effects on the aerospace company's suppliers.

A work stoppage by about 45,000 dockworkers on the East Coast and Gulf Coast ended late on Thursday after their union and port operators reached a tentative deal.

The Boeing strike, if it persists beyond next week, could dent the nonfarm payrolls data for October, which will be released just days before the Nov. 5 US presidential election.