Persistent Strong Job Growth Implies Further Interest Hikes

Job growth remained solid in September as the Federal Reserve fights against inflation. In fact, the recent jobs data have been stronger than most economists expected and is a reminder that GDP growth for the third quarter will be very strong and inflation risks will persist.

Despite restrictive monetary policy, nearly 5.9 million jobs have been created since March 2022, when the Fed enacted the first interest rate hike of this cycle. In the first nine months of 2023, nearly 2.3 million jobs were created, and monthly employment growth averaged 260,000 per month, following the average monthly growth of 399,000 in 2022.

Total nonfarm payroll employment increased by 336,000 in September, following a gain of 227,000 in August, as reported in the Employment Situation Summary. The estimates for the previous two months were revised higher. The unemployment rate remained at 3.8% in September.

However, wage growth slowed. In September, wages grew at a 4.2% year-over-year growth rate, down 1.8 percentage points from the highest gain of 5.7% in February 2022. Slowing wage growth was the one positive data point for those hoping for slowing inflation in the labor market report.

Meanwhile, the labor force participation rate — the proportion of the population either looking for a job or already holding a job — remained unchanged at 62.8%. Moreover, the labor force participation rate for people who aged between 25 and 54 was unchanged at 83.5%. While the overall labor force participation rate is still below its pre-pandemic levels at the beginning of 2020, the rate for people who aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

Jing Fu, Ph.D., NAHB director of forecasting and analysis, provides a breakdown by industry sector in this Eye on Housing post.