An economy that beats the predictions?

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"The American economy is supposed to be slowing down right now," said The Economist. Instead, the data on the labor market show that business  hiring is somehow still picking up steam. "The country added 336,000 jobs in September, nearly twice as many as forecast and the most since January." This news, released last week, wasn’t greeted as warmly as one might expect. Some analysts think the strong figures could encourage the Federal Reserve to keep interest rates higher for longer — or even resume hiking rates. A lot of hiring generally means there is competition for talent, which can cause wages to go up and inflation to remain above normal. So far, that doesn’t seem to be the case: "Average hourly earnings — a proxy for wage growth — were up 0.2% month on month, the slowest monthly rise since early 2022." That’s a good sign that American growth is "impressive, not excessive."

Cheers to the hospitality industry, said Catherine Rampell in The Washington Post. Employment in bars and restaurants has finally returned to where it was in February 2020. "When Covid hit, the shuttering of businesses around the country and reluctance of consumers to dine out eliminated about half the jobs across the industry," about 6 million positions in total. And so much for the pandemic "she-cession." Prime-age working women, ages 25 to 54, "are more likely to be working today than at any previous time in history." In total, the jobs report showed "the U.S. economy to be far more resilient than economists expected," said Michael Hiltzik in the Los Angeles Times. Instead, the commentary focused on the sour reaction of the financial markets trying to anticipate the Fed’s next move. "This amounts to mistaking the scoreboard for the game": The financial markets offer an "instant snapshot," while "the game is the creation of financial health for American workers over the long term."

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A hot labor market can still go cold quickly, said Justin Lahart in The Wall Street Journal. Even if inflation cools, strong jobs numbers like September’s "give the Fed less reason to cut rates next year." This higher-for-longer rate scenario will begin to take its toll on businesses at some point — if it hasn’t already. The problem for policymakers is that the jobs report "has historically been a lagging economic indicator." The U.S. was adding jobs through the end of 2007, for instance, but the layoffs mounted quickly the following year, setting up forecasters for a nasty surprise.

The "real economy" might be uncomfortably close to that tipping point, said Jeanna Smialek and Joe Rennison in The New York Times. The Fed’s policy adjustments "sometimes take a while to push up borrowing costs for consumers." But a ramp-up in rates this summer coming from banks and other lenders has clearly made it "more expensive to finance a car purchase, expand a business, or borrow for a home." So far, consumers have continued to spend and businesses have kept investing. But if rates ratchet higher, "they could accidentally wallop the economy instead of gently cooling it."

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