The release of the September Jobs Report on Friday, October 6th, is highly anticipated, as it will provide crucial insights into the health of the U.S. labor market and potentially influence the Federal Reserve’s decision on future interest rate cuts. The Fed has already lowered rates by 50 basis points in September, and the upcoming report will be a key factor in determining the extent of future rate adjustments.
Economists are predicting a slight dip in monthly new nonfarm payrolls from 142,000 in August to 140,000 in September, according to Trading Economics. The unemployment rate is expected to remain steady at 4.2%. Early indicators from the private sector point to a positive trend, with 143,000 jobs added in September, an increase from the 99,000 added in August.
However, there are other factors at play that could impact the report’s interpretation. Recent data, such as the ISM Survey, indicating economic growth and rising price pressures, could suggest a case for more gradual interest rate cuts. This is a delicate balancing act for the Fed, as they attempt to mitigate the risk of inflation while also supporting a softening job market.
Bill Adams, Chief Economist at Comerica Bank, anticipates a rebound in hiring in 2025, particularly in industries like housing, manufacturing, and consumer goods, as a result of the interest rate cycle. He predicts 150,000 nonfarm payroll jobs added in September and an unemployment rate of 4.2%. While this suggests modest job growth, Adams believes the economy is still on track for a ‘soft landing.’
However, other experts have a more cautious outlook. Jeffrey Roach, Chief Economist at LPL Financial, observes a slowdown in employment demand within the manufacturing sector due to hiring freezes. He expects the upcoming report to reflect fewer hirings and a slightly higher unemployment rate. Roach anticipates a 25-basis-point rate cut at each of the remaining Fed meetings this year, barring any unexpected deterioration in economic conditions.
While the jobs report is expected to be a significant influence on the Fed’s decisions, investors appear to be anticipating a weaker report and may not react strongly to the data. This suggests that the market is already factoring in a scenario of slower job growth.
Ultimately, the September Jobs Report holds significant weight in shaping the trajectory of interest rates. If the report reveals weaker-than-expected job growth, it could bolster the case for a 50-basis-point rate cut in November. Conversely, a stronger-than-expected report could increase the likelihood of a 25-basis-point cut. The Fed will be closely monitoring the report, along with other economic indicators, as they determine their next steps in navigating a complex economic landscape.
