What was that about a recession? Despite speculation about an impending economic downturn, the US labor market flexed its muscles in September, adding a staggering 254K jobs — the strongest showing since March. The unemployment rate also dipped to 4.1%. Economists were caught off guard by these strong job gains, which exceeded even the most optimistic forecasts.

• Average hourly earnings grew by 0.4% from the previous month and 4% from a year ago, outpacing inflation and providing much-needed relief for households.
• These impressive numbers have sparked a lively discussion about the Fed’s next steps, with some arguing that the central bank may need to pump the brakes on aggressive rate cuts.

Hitting the sweet spot: Chicago Fed President Austan Goolsbee hailed the report as “superb,” suggesting that more strong data could point to a successful “soft landing” for the economy, allowing the Fed to reach its full employment goal without a crash. While policymakers still anticipate significant rate cuts over the next 12-18 months to support the labor market and keep inflation around the 2% target, the final policy rate may need to be higher than previously thought if job growth and GDP continue to improve.