Hourly earnings growth close to its lowest level in two years despite the growth of the labor market

The Bureau of Labor Statistics reported that 336,000 new jobs were added in September. The unemployment rate remained at 3.8%.

The Bureau of Labor Statistics published its monthly report monthly that offers data on the nation’s "employment status." It revealed that 336,000 people who were out of work were hired in September. The figure marks an increase "above the average monthly gain of 267,000 over the prior 12 months."

The report also revealed that the unemployment rate remained at 3.8% (6.4 million people) without significant changes compared to August:

Total nonfarm payroll employment rose by 336,000 people in September, and the unemployment rate was unchanged at 3.8%. ... The number of unemployed persons was essentially unchanged at 6.4 million.

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Public employment vs. private employment

The private sector added 263,000 jobs in September. The report revealed that the increase occurred to a greater extent in "leisure and hospitality; government; health care; professional, scientific, and technical services; and social assistance":

- Leisure and hospitality (+96,000 jobs).

- Food and beverage services (+61,000).

- Accommodation sector (+16,000).

On the other hand, public employment also increased, adding 73,000 jobs (much more than "the average monthly gain of 47,000 over the prior 12 months"). The report states that the increase in public employment occurred in "state government education and in local government, excluding education" :

- State administration and education (+29,000)

- Local administrations, excluding education (+27,000)

- Health sector (+41,000)

The report highlighted that "employment continued to trend up in ambulatory health care services (+24,000), hospitals (+8,000) and nursing and residential care facilities (+8,000)." Employment in professional, scientific and technical services also "increased by 29,000 jobs in September, in line with the average monthly gain," and social assistance "added 25,000 jobs in September, about the same as the average monthly gain of 23,000 over the prior 12 months.

Increased risk of another rate hike

Employment data surpassed the initial expectation of 170,000 new payroll employees in September. However, it also revealed that the annual increase in average hourly earnings fell to its lowest level in two years (4.2%).

John Leiper, chief investment officer of Titan Asset Management, stated in BolsaManía that "although the labor market and the economy remain strong, this is still not being significantly reflected in salaries" arguing that "Average hourly earnings were below expectations and fell slightly year over year."

He reviewed the opinion of Oxford Economics analysts, who consider that "the employment data increases the risk of another rate hike":

We continue to think the Federal Reserve will act cautiously given the rapid tightening of financial conditions since the September FOMC meeting. However, a bullish surprise in next week's CPI report could tip the balance in favor of a rate hike at the November 1 meeting.