Jobs report shock: American economy added a stunning 336,000 jobs in September

The US economy feels lousy for many people. A majority of Americans say President Joe Biden’s policies have made economic conditions worse, according to a CNN Poll conducted by SSRS.

So you'd think some really, really, shockingly good news about the job market would give Americans' spirits a boost.

It won't. Here's why: Inflation is still biting. Prices continue to rise faster than anyone would like. Although annual price increases aren't in wild-runaway mode like they were when inflation was above 9% last year, inflation is still above 3%, which is higher than economists say is healthy.

When you see gas prices at $3.75 on average (and above $4 in plenty of places across the country), mortgage rates above 7% and at a 23-year high, food prices going up at the grocery store, and a restart to student loan payments for millions of Americans, a robust job market won't make most people feel like the economy is strong.

In fact, a strong jobs market may ultimately make many Americans feel worse. How? The Federal Reserve is working to slow the economy by hiking interest rates — the only tool it has to fight inflation. A still-robust job market means the central bank could continue to increase rates without fear of sending the economy into a recession.

JPMorgan CEO Jamie Dimon repeated in recent weeks his fear that rates could go to 7%. Government bond yields are rising to multi-year highs in expectation that rates could go up — and loans pinned to those yields, including mortgages and credit card rates — are set to go up, too.

We should never cheer a bad job market. But a job market that has remained this healthy for this long really isn't excellent news for average Americans struggling to pay their bills. Meanwhile, we remain in a "good news is bad news" conundrum that makes most people feel like the US economy is in a bad spot.

The US job market is still kicking off plenty of heat, with hiring surging by a surprisingly high 336,000 positions last month; however, wages are cooling off.

Average hourly earnings rose by 0.2% in September, bringing the annual gain to 4.2%, according to the Bureau of Labor Statistics' jobs report released Friday.

That lands below economists' expectations for a monthly uptick of 0.3% and annual increase of 4.3%, according to Refinitiv.

September's wage growth is the lowest seen monthly since February 2022 and year-over-year since June 2021, noted Andrew Patterson, Vanguard senior economist.

"Like most reports, the Fed will find things to like and dislike here," Patterson wrote Friday. "Inflation data will weigh heavily this month ahead of [the Fed's next meeting on October 31 and November 1]."

The Federal Reserve has wanted to see an easing in labor market activity and, especially, wage growth as those fuel consumer demand and could put upward pressure on inflation.

Inflation gauges closely tracked by the Fed have cooled significantly since hitting highs last year; however, they've been easing at a slower pace in recent months, thanks in part to a pickup in gas prices.

Still, cooling inflation has helped Americans finally see real wage growth in recent months.

September's job gains blew expectations out of the water.

At 336,000, it's the largest monthly employment gain since January and is significantly above August's net gain of 227,000 jobs, which was revised up by 40,000 from initial estimates.

Job growth to end the summer was hotter than initially thought: In addition to August's upward revisions, July's gains were revised up by 79,000 to 236,000. 

In September, leisure and hospitality helped drive job growth higher, with 96,000 jobs added. That's above the pace of 61,000 jobs a month that this sector has seen during the past 12 months, according to the BLS report. 

The unemployment rate held steady at 3.8% in August, and the number of unemployed workers was essentially unchanged at 6.4 million.

Consensus estimates from economists were for 170,000 net jobs added and a jobless rate of 3.7%, according to Refinitiv.

While September marks the 33rd consecutive month of job growth for the United States, the Federal Reserve has been aiming to slow the economy and cool down the labor market.

Dow futures tumbled by more than 200 points on the news, with futures on the S&P and Nasdaq falling by around 1% and 2%, respectively, as traders anticipated an additional rate hike from the Federal Reserve.

The resiliency of the labor has helped to keep consumer spending strong and the economy churning, but Fed officials have expressed concern that could be too much of a good thing and put upward pressure on inflation. 

US stock futures tumbled Friday morning after the September jobs report data was released, with Dow futures tumbling by more than 200 points and futures on the S&P and Nasdaq falling by around 1% and 2%, respectively.

Treasury yields surged, with the 10-year approaching a 16-year high again as investors anticipated another rate hike from the Federal Reserve as it battles to cool an economy and labor market that continue to show resilience despite 11 rate hikes since March 2022.

US job growth heated up in September, adding 336,000 positions, according to data released Friday by the Bureau of Labor Statistics.

Last month's job gains were far higher than expected and above August's total of 227,000.

While September marks the 33rd consecutive month of job growth for the United States, the Federal Reserve has been aiming to slow the economy and cool down the labor market.

For much of the past 18 months, the unemployment rate has drifted between 3.4% and 3.7%, a historically low range that stood in defiance to the barrage of Federal Reserve interest rate hikes and expectations for increased joblessness.

In August, the unemployment rate unexpectedly jumped 0.3 percentage points to 3.8%. And while monthly data and the unemployment rate itself can be quite volatile, a driver behind the increase was a welcome one: an increase in labor force participation.

“How much of that was noise?” said Nick Bunker, head of economic research for the Indeed Hiring Lab, adding that if monthly job gains remain north of 100,000, “how many more [people] can that pull into the labor force?”

Labor force participation plummeted during the early stages of the pandemic, but during the past year, more people have returned to the labor force.

The overall labor force participation rate rose to 62.8% in August, BLS data shows. That’s the highest it’s been since the onset of the pandemic.

How much higher it can climb is unknown: Even before Covid was in play, labor force participation was trending downward, largely due to the massive Baby Boomer generation aging out of the workforce.

“Can job openings drop and labor force participation rise at the same time?” Bunker asked, noting that the latter likely “doesn’t have enough power to fight back against the extremely powerful force of demographics.”

US stock futures are slightly higher Friday morning — but that could all change at 8:30am ET when the jobs report is due. Investors have been especially sensitive lately to data that paints the picture of a resilient US economy. Strong reports have lifted soaring bond yields and raised the specter of a more aggressive Federal Reserve.

Stocks closed relatively flat on Thursday as bond yields dipped and traders shifted their focus to key labor market data out on Friday morning. The upcoming jobs report could provide insight about whether the Fed will keep interest rates higher for longer at their policy meeting later this month. 

Friday’s jobs report is expected to show that 170,000 jobs were added to the economy in September (that’s a cooling from the estimated 187,000 net gain in August) and that the unemployment rate ticked down to 3.7% from 3.8% the month prior. 

The numbers come after a week of mixed data, painting an unclear picture of the labor market. 

On Tuesday, the JOLTS report showed that the number of available jobs unexpectedly rose higher in August. That caused a market plunge. The Dow lost 454 points, or 1.3%, notching its biggest decline since March and turning negative for 2023. The S&P 500 and Nasdaq dropped 1.4% and 1.9% respectively. 

A day later, ADP's national employment report showed that private-sector employers scaled back their hiring efforts far more than expected. 

While a strong jobs report is seen as a sign of a strong economy and a good thing for Main Street, it exacerbates anxiety on Wall Street that the Fed will continue its aggressive interest rate hikes to rein in inflation. 

Treasury yields, meanwhile, pulled back from their highest levels since 2007 following the release of the data. The 10-year fell to 4.71% after reaching 4.8% on Tuesday. 

—CNN's Matt Egan contributed to this report.

President Joe Biden is expected to tout what the White House is calling the “unprecedented turnaround in America’s manufacturing leadership” and “our strong jobs market thanks to Bidenomics” when he speaks at the White House Friday morning – as job creation has shown signs of slowing and the White House tries to combat negative polling on Biden’s handling of the economy. 

Biden will give remarks on jobs day and National Manufacturing Day and kick off the third Investing in America tour, White House Assistant Press Secretary Michael Kikukawa said in a statement. 

The White House has been pushing the “Bidenomics” message for months – even as the economy has showed signs of possible strain due to high interest rates, nationwide labor strikes, and student loan repayments starting up for the first time in more than three years less than a week ago. 

According to a Marquette Law School survey released Thursday, the message is not yet resonating with Americans.

Among all registered voters, half (50%) say former President Donald Trump would do a better job of handling inflation, with 27% saying Biden would, and the rest trusting neither candidate on the issue or seeing little difference between the two.

Trump also holds substantial leads on trust to handle the economy (52% trust Trump more, 28% trust Biden more) and job creation (49% Trump, 30% Biden).

This time last week, the prospects seemed to be growing dimmer that the September jobs report would land this Friday as planned.

A government shutdown would have forced the Bureau of Labor Statistics to go dark and result in the blackout of critical economic data.

But after a last-minute deal in Washington, the key labor market data is now set to flow as it should.

Whether it ultimately meets expectations is another question entirely.