US jobs growth accelerates again – Commerzbank

After the disappointing data of late, the situation on the US labor market improved markedly again in September. At the same time, the unemployment rate fell to 4.1%. Of course, individual monthly figures should not be overstated. But this report should ease concerns that the US economy is on the verge of a recession, Commerzbank’s Senior Economist Dr. Christoph Balz notes.

US economy to avoid a recession

“After several disappointing employment reports, the data for September were surprisingly favorable. The number of jobs rose sharply, and revisions to the data showed that the situation in previous months was better than feared. All sectors expanded, except for manufacturing and transportation. At the same time, the unemployment rate fell, with even the broadest measure of underemployment, which includes, among others, involuntary part-time workers, falling from 7.9% to 7.7%. In addition, wages rose more sharply again, with the increase in August also being revised upwards. The only weak point is that employees worked shorter hours on average.”

“The employment figures are based on a sample of selected companies rather than a full survey of all companies. They can therefore fluctuate sharply from month to month. Accordingly, individual monthly values should not be over-interpreted. Just as the last reports probably presented the situation as too bad, today's figures could be ‘too good’. The six-month average is likely to be more meaningful. It continues to show a slight weakening. However, there is no sign of an imminent slump. Rather, significant employment gains and rising wages suggest that private consumption will continue to support GDP growth. We continue to expect the US economy to avoid a recession.”

“After the 50bp rate cut in September, the question now is whether the US Federal Reserve will maintain this pace in November or whether there will be ‘only’ a 25bp move. The labor market will presumably play the decisive role here, as the Fed does not want to see any further weakening here. However, there is little sign of such a weakening in today's figures. Today's report rather supports our forecast of a ‘small’ step. However, another employment report will be published before the next meeting, along with consumer prices and quarterly employment costs.”