U.S. Jobs Report: Unemployment Rate Fell to 4.1%

Unemployment Rate

The unemployment rate is a measure of the percentage of people in the labor force who are actively seeking work but are not currently employed. It’s calculated by dividing the number of unemployed individuals by the total labor force and multiplying by 100. This rate is a key indicator of economic health, reflecting the availability of jobs and the overall economic conditions.
In September 2024, the U.S. unemployment rate dropped to 4.1% from 4.2% in the last month. It was the lowest in three months, and surprised market expectations, which had forecasted the rate to remain unchanged.

Non-Farm Payrolls

Non-Farm Payrolls (NFP) measure the number of jobs added or lost in the U.S. economy, excluding farm workers, private household employees, non-profit organization workers, and active military personnel. This data is released monthly by the U.S. Bureau of Labor Statistics (BLS) and is a key indicator of economic health.

The NFP report is closely watched by economists, businesses, and investors because it provides insights into the labor market and overall economic conditions. Significant deviations from expected NFP figures can lead to market volatility, especially in the forex, stocks, and commodities markets.

In September, the U.S. economy added 254,000 non-farm payroll jobs, significantly surpassing the market expectation of 140,000. This strong performance indicates a robust labor market and contributes to the overall economic optimism.

However, manufacturing payrolls in the United States decreased by 7,000 in September, slightly exceeding market expectations of a 5,000 drop. This was followed by a decline of 27,000 in August.

Average hourly earnings for all employees on US private nonfarm payrolls increased 0.4% over a month to $35.36 in September. Also, this surpassed market forecasts of a 0.3% rise.

Furthermore, average hourly earnings for all employees on US private nonfarm payrolls increased by 4% year-on-year in September. This was the most in four months, and topping market estimates of a 3.8% gain. 

Moreover, the average workweek for all employees on US private nonfarm payrolls edged down by 0.1 hours to 34.2 hours in September.

Meanwhile, in manufacturing, the average workweek was unchanged at 40 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.7 hours. 

JOLTs Job Reports

The Job Openings and Labor Turnover Survey (JOLTS) is a monthly report by the U.S. Bureau of Labor Statistics (BLS) that provides data on job openings, hires, and separations. This survey helps gauge labor demand and turnover in the U.S. economy.

For September 2024, the JOLTS report indicated that there were 7.7 million job openings. This data is crucial for understanding the dynamics of the labor market, including how many positions are available, how many workers are being hired, and how many are leaving their jobs.

Also, the JOLTS report indicated that the number of jobs quits was 3.1 million. This was the lowest since August 2020. This figure reflects the number of employees who voluntarily left their jobs, often seen as a sign of worker confidence in the labor market. This was the lowest since August 2020.

ADP Employment Change

The ADP Employment Change report estimates monthly job changes in the U.S. private sector, excluding government jobs. It’s released by ADP and provides an early look at employment trends before the official government report. This data helps gauge the health of the labor market and is closely watched by investors and economists.

In September 2024, the ADP National Employment Report indicated that the U.S. private sector added 143,000 jobs. This marked a rebound in job creation after a five-month slowdown.

Jobless Claims

Jobless claims refer to the number of people filing for unemployment benefits. There are two main types:

• Initial Jobless Claims: These are new claims filed by individuals seeking unemployment benefits for the first time.
• Continuing Jobless Claims: These are claims filed by individuals who are already receiving unemployment benefits and continue to do so.

Jobless claims are a key economic indicator, providing insights into the health of the labor market. Rising jobless claims can signal a weakening economy, while falling claims suggest an improving job market.

In the week ending September 28, 2024, initial unemployment claims in the U.S. rose by 6,000 to 225,000, exceeding market expectations and marking a three-week high. This increase suggests a softening labor market and supports predictions of upcoming Federal Reserve rate cuts. Meanwhile, continuing jobless claims slightly decreased to 1.826 million for the week ending September 21, 2024, down from 1.827 million the previous week.

Impact of These Jobs Report on Market

The job reports released in the first week of October 2024 had a notable impact on the stock market, including the S&P 500. Here are some key effects:

• Positive Market Reaction: The strong job growth of 254,000 non-farm payrolls and a drop in the unemployment rate to 4.1% boosted investor confidence, leading to a rally in the stock market.
• Wage Growth: The increase in average hourly earnings to $35.21 indicated rising consumer spending power, which is generally positive for the economy and stock prices.
• Federal Reserve Expectations: The robust labor market data reinforced expectations that the Federal Reserve might delay further rate cuts, which initially caused some volatility but ultimately supported a bullish sentiment as it suggested economic resilience.
• Sector Performance: Sectors sensitive to economic growth, such as technology and consumer discretionary, saw significant gains as investors anticipated stronger earnings.

Overall, the positive job reports helped lift the S&P 500 and other major indices, reflecting optimism about the U.S. economy’s strength.