A Blowout Jobs Report Shows Strong Job Gains Across the Board

A Blowout Jobs Report Shows Strong Job Gains Across the Board

It is hard to find any bad news in today’s jobs report. With an acceleration in job growth to 336K payrolls in September and upward revisions for the prior months, the jobs data is finally consistent with real-time estimates of third-quarter GDP growth. Together, they suggest a summertime boom. 

With today’s blowout payroll figures, every major sector, except one (leisure and hospitality), has now recovered to its pre-pandemic employment levels. The economy continues to add jobs at twice the pre-pandemic pace. Even the most highly interest rate-sensitive industries, such as manufacturing (+17K) and construction (+11K), continue to expand despite the 11 interest rate hikes over the past 18 months. And the industries that have been lagging behind in the jobs recovery are catching up. 

There’s good news for everybody on the wage front, too. Wage growth cooled to 4.15% over the year, down from 5.9% in March 2022. Over the past three months, wages have grown even more slowly, at a 3.4% annualized rate. But real wage growth remained positive over the year, given 3.7% inflation. 

Almost everyone expected that bringing down inflation and wage growth would require painful job losses. But today’s jobs report continues to challenge that narrative. Inflation has cooled meaningfully over the past year, and the economy has added 3.2 million payrolls and 2.7 million employed Americans, substantially more than is normal, even in the best years. 

The information sector remains the glaring exception, with employment down 2.5% over the past year and continuing to fall. Transportation and warehousing also continue to be lackluster. But even in those sectors, employment remains well above pre-pandemic levels and has simply returned to the trend line from before the COVID tech and transportation boom. 

Americans may wonder how it is possible that employment is growing so fast, even as inflation cools. The strong suggestion in this report is that labor productivity is rising, encouraging employers to add more workers even as inflation falls and reduces pressure on wages. Productivity grew at a 3.5% annualized rate in Q2, and employment data for Q3 suggest similarly strong growth in the past three months. 

What does this mean for job seekers? The economy continues to generate opportunities. Job seekers are experiencing high rates of financial distress, with 23% saying they are experiencing serious financial difficulty. What does it mean for employers? Rates will likely stay high for longer, so employers will need to adjust to that high-rate environment. Employers who have been sitting on the sidelines, delaying investments and headcount increases until rates come down, may need to rethink that strategy and chart a way forward with high rates here to stay.