United States

Middle market takes hiring baton, boosts job creation


The real economy continued to gain traction in September as the jobless rate fell below 6 percent for the first time since 2008. The breadth and composition of hiring also improved, which should result in a better outlook for incomes and spending ahead of the critical holiday shopping season. Sustained hiring around the current six-month trend of 245,000 jobs per month should create conditions that will benefit middle market firms in business and professional products, consumer products, financial services and industrial products.

This employment report supports other labor market data that reflect improving conditions in the middle market - the heart and soul of the real economy. The one-year diffusion index, which reflects hiring across all sectors of the economy, improved to 78.6 from 78.9, indicative of an evolving economic narrative that suggests small and mid-size firms have taken the baton from large companies and should continue to lead in total job creation. After a long economic winter, it is clear that conditions in the non-financial economy have reached the point where the prosperity enjoyed by the two upper quintiles of income earners is beginning to spread throughout the economy.

Hiring Rebounds in September

Source: McGladrey, BLS

The details of the report reflect the recent trend where the creation of higher-paying jobs is outpacing lower-paying job growth, a hallmark of the current business cycle. Hiring in goods producing, construction, business services, education, government trade and transport accounted for a majority of hiring in September.

The upward revision to the August payroll estimate of 180,000, a decline in those working part-time for economic reasons to 7.1 million from 7.27 million, and the fall in the unemployment rate suggest that the Fed will continue to prepare the public for the beginning of its rate hike campaign. We expect that once the rate hikes begin they will be conducted in a gradual and orderly fashion that takes into account conditions in the real economy. This means present concerns about inflation risks may be misplaced.

High Wage Jobs Take the Lead

Source: McGladrey, BLS

While average hourly earnings on a year-ago basis slipped to 2 percent from 2.1 percent in August, similar gains in hiring during the next few months will attract more individuals back to the workforce. This will give policy makers the signal they have been waiting for to kick off what will be a multi-year normalization of the term structure of interest rates that may begin as soon as March 2015.


Subscribe to
The Real Economy

Receive the monthly outlook directly to your inbox

Events / Webcasts


Coronavirus webcast series: April 1, 2020

  • April 01, 2020


Coronavirus webcast series: March 25, 2020

  • March 25, 2020


Coronavirus webcast series: April 8, 2020

  • March 18, 2020


Coronavirus webcast series: March 18, 2020

  • March 18, 2020