US job growth surges well above expectations in September

US non-farm payrolls more than doubled expectations in September, sending signal that US labor market remains resilient and leaving room for the Federal Reserve to further raise interest rates this year.

The economy created 336,000 jobs last month, compared to August’s increase of 227,000, upwardly revised from previously reported 187,000 and strongly beat consensus for 170,000 new jobs in September.

Unexpectedly strong rise in hiring in September contributes to the fact that US labor sector is still tight and strong enough to stand possible further policy tightening, though expectations for another 25 basis points increase in November were so far split.

However, positive signals from upbeat non-farm payrolls numbers in September were partially offset by unchanged unemployment rate which stayed at 18-month high at 3.8% vs expectations for dip to 3.7%.

Also, wage growth kept the same the same pace of 0.2% monthly increase against 0.3% consensus, while annualized figure ticked to 4.2% from 4.3% in August / forecast, but remains well above desired pace of 3.5%, which is seen consistent with Fed’s 2% inflation target.

Strong labor market will continue to support the economy, which is expected to grow by 4.9% annualized pace in the third quarter and contributing the Fed’s recent narrative of soft landing, although situation in other sectors is not that bright, with manufacturing and consumer spending expected to face the strongest impact from high borrowing cost, while political turmoil in Washington adds to warning signals.

Immediate market reaction on labor data was rise of dollar and increased pressure on its major counterparts, though markets still need to digest today’s data and provide clearer direction signals, however fresh support to expected Fed’s ‘higher for longer’ rate policy is likely to continue to boost demand for the dollar.