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Key Takeaways
- The acceleration of job growth in September raised the chances the U.S. economy will avoid a crash and instead have a "soft landing" from the post-pandemic surge of inflation.
- The better-than-expected report eased concerns that the labor market was slowing down under the weight of high borrowing costs imposed by the Federal Reserve to control inflation.
- Healthy job creation could spur continuing economic growth into the year ahead, one economist predicted.
The U.S. economy looks more likely to have a "soft landing" rather than an economic crash in the wake of Friday's jobs report showing employers hired far more workers than expected in September.
The U.S. economy added 254,000 jobs last month, rebounding after several sluggish months in the summer, according to a report released Friday by the Bureau of Labor Statistics. That burst of job creation dispelled some of the concerns that had been brewing among economists that the economy is grinding into a downturn under the weight of high borrowing costs, the result of the Federal Reserve's campaign of anti-inflation rate hikes.
The report highlighted the resilience of an economy that has consistently defied a long-predicted recession. Ever since the Fed began ratcheting up its benchmark interest rate in early 2022 to combat inflation, a significant contingent of experts has predicted the economy would fall into a recession as a result: the hangover from the hot economy and high inflation that took hold as the country emerged from the grip of the pandemic.
Recession Fears Had Flared Up Recently
Recession fears flared up this summer after an uptick in unemployment triggered the Sahm Rule, a historically reliable indicator of an imminent economic downturn.
But now, with inflation nearly back to the Fed's 2% goal, the central bank is cutting interest rates, and still there is no recession in sight, raising hopes for a soft landing, which would be a historical rarity after a period of high inflation. Friday's data reinforced those soft landing hopes.
"This report should end any fears that the economy was heading for a recession, as some analysts had feared based on the earlier increase in unemployment," Dean Baker, senior economist at the Center for Economic Policy Research think tank, wrote in a commentary.
Some Warning Signs Remain
The report did not completely erase concerns about slower growth ahead, as surveys of consumer confidence show that the public is still relatively glum about the job market, which poses a risk that people could curtail their spending. And the Sahm Rule, which is calculated based on how quickly the unemployment rate has risen over the past year, stayed in "recession alarm" territory although just barely.
"The labor market’s ongoing rebalancing toward a soft landing remains fragile," Nick Bunker, economic research director for North America for the hiring lab at job site Indeed, wrote in a commentary.
Jobs Growth, Low Inflation Bode Well for Economy
Overall, however, the report showed the economy gathering strength.
"The economy is doing well in late 2024, with solid growth of jobs and wages, low unemployment, slowing inflation, and falling interest rates," Bill Adams, chief economist for Comerica Bank, wrote in a commentary. "The setup for economic growth in 2025 looks favorable as well."