Kiplinger Jobs Outlook: Labor Market Strength Surprises

last updated 4 October 2024

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254,000 jobs were added in September, and July and August figures were revised up. The unemployment rate declined for the second straight month, and is now at 4.1%. The number of people working full-time rose, and the number having to work part-time because of slack conditions fell. Worries about a weak labor market leading to a recession have dissipated, and long-term bond yields are rising because of fears that the unexpected strength in hiring could boost inflation again. Hiring in health care and social assistance, food service, and state and local government are again carrying the market, accounting for two-thirds of the gain in September.

However, a return to more typical levels of hiring in the labor market is still imminent, with future monthly gains likely to be in the 150,000 range. Eventually, food service and government will make up for the labor shortages they experienced during the pandemic. Also, the goods-producing sector is still showing weakness. There were job losses in manufacturing, transportation and warehousing, and temporary employment. Temp jobs continued their downtrend, which has been in place for more than two years now. These jobs are often in the manufacturing sector and tend to be cut first when demand for manufactured goods softens.

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Wage growth was mixed — it continued to ease for production workers, but has stayed strong for all workers, on average, at 4.0%. September marked the first time in more than three years that year-over-year wage growth for production workers fell short of the broad average.

Given the strength in hiring and wages, it is likely that further interest rate cuts by the Federal Reserve will come in quarter-point increments. The key question is whether the Fed will cut at its November 7 policy meeting, or wait until its December 18 meeting. The Fed will be keenly interested in the next release of the Employment Cost Index on October 31, for third-quarter data. They regard that as a more reliable measure of wage pressures than the headline Consumer Price Index.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.