The settlement of the longshoremen’s strike on Friday together with the release by BLS of jobs creation for September should be comforting news to markets that the risks of an abrupt slowdown have lessened significantly. The BLS report suggests that the Fed’s recent rate cuts have already begun to work. As the following chart shows, the economy created 254,000 jobs in September – 100,000 more jobs than were created in any of the preceding three months.
Three sectors showed increases: Healthcare added 45,000 jobs; government jobs increased by 27,000; and construction added 25,000. In the chart, we see steady increases in job creation in each month of the 3rd quarter, and this trend is also accompanied by a continued drop in the unemployment rate, which now is at 4.1%, while wages have increased.
Vice-presidential candidate JD Vance argues that the data are suspect because most of the jobs created were taken by illegal immigrants. However, BLS data from the August and September employment reports indicate that the number of foreign-born workers, who account for about 19% of the labor force, declined by about 222,000 between August and September, whereas the number of US born workers were actually up by some 920,000 over the same period. To be sure, these numbers don’t break out the number of foreign-born workers who are US citizens, the number of legal immigrants, or the number of illegal immigrants. But the raw data estimates are clearly inconsistent with the claim that the 254,000 jobs created in September were all taken up by foreign-born workers.
In addition to the positive job growth, data for Q3 show that real GDP growth in Q2 was at 3%, which is above what was considered potential and up from Q1’s 1.6%. These data, coupled with what we know about growth in Q3 from the Fed’s Beige Book and with the recent inflation information, show that the FOMC is on course to achieve its 2% PCE inflation target without causing a recession. PCE inflation is now at 2.2% in August, down from 2.6% in July.
Putting these data in context – and with the removal of the potential threat that a dock strike might have meant for both inflation and growth – it really does appear that we are now on a sound track for the FOMC to achieve its goals for inflation and a soft landing.
Robert Eisenbeis, Ph.D.
Vice Chairman & Chief Monetary Economist
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