A blockbuster jobs report on Friday paved the way toward a soft landing, in which inflation returns to normal levels while the U.S. economy averts a recession, experts told ABC News.
Employers hired 254,000 workers last month, blowing past economist expectations of 150,000 jobs added, U.S. Bureau of Labor Statistics data showed. The unemployment rate ticked down to 4.1%.
The labor market ended a monthslong slowdown, rebuking any lingering concern about an imminent recession and easing pressure on the Federal Reserve to stimulate the economy with rapid-fire interest rate cuts, experts said.
Instead, they added, the robust bill of health for the economy allows the Fed to keep close watch on inflation while steadily lowering borrowing rates in an effort to maintain the solid job market.
“A soft landing is in sight,” Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, told ABC News in a statement. “The bottom line here is that a resilient labor market is continuing to support consumers and the Fed is cutting rates.”
Weaker-than-expected jobs data in both July and August had stoked concern among some economists about the nation’s economic outlook. A marked uptick in the nation’s unemployment rate had also drawn concern, though the measure remained near 50-year lows.
Two weeks ago, the Fed cut its benchmark interest rate a half of a percentage point, signaling a shift toward greater focus on safeguarding a strong labor market.
The fresh jobs data defied any such worries by presenting a rosy picture of the economy in which employers are hiring at a strong pace, a large share of people are staying on the job and wages are rising at a fast rate, analysts said.
“The monster upside surprise suggests that the labor market may actually be a picture of strength, not weakness,” Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.
Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, Sept. 18, 2024.
Tom Brenner/Reuters, FILE
Meanwhile, inflation has slowed dramatically from a peak of about 9% in 2022, though it remains slightly higher than the Fed’s target of 2%.
The combination of stable inflation and steady employment growth marks a dramatic shift from the economic uncertainty that loomed over the economy three years ago. Back then, a blazing-hot labor market and sky-high inflation triggered the most aggressive series of interest rate hikes at the Fed in decades.
The spike in interest rates elicited gloomy forecasts of a recession from many economists, since high interest rates typically weigh on economic activity, causing businesses to slow investment and lay off workers.
The economy has proven those predictions wrong. The economy has continued to grow. While the labor market has slowed over the past year, it has remained healthy, experts said.
“The jobs report should help ease investors’ worries that the U.S. labor market is teetering on a cliff, threatening to drag the economy down with it,” Bret Kenwell, U.S. investment analyst at eToro, told ABC News in a statement.
“While one report doesn’t necessarily give investors the ‘all-clear’ sign, it’s a huge step in the right direction,” Kenwell said.
Experts who spoke to ABC News said the flex of labor market strength on Friday softens pressure on the Fed to speed up its rate cuts and stimulate the economy. In turn, the experts expect the Fed to cut interest rates a quarter of a percentage point at the central bank’s next meeting in November.
“This shows that they don’t really need to be in a rush right now,” said Ausenbaugh, of J.P. Morgan Wealth Management.
Source Agencies
