Nicke Rummell

MANHATTAN (CN) — The U.S. economy added 254,000 jobs last month and the unemployment rate dropped, showing that the labor market, while strained, still has plenty to give.

The headline number, released Friday morning by the Bureau of Labor Statistics, came in well above the 150,000 jobs predicted and more than 100,000 jobs higher than the 142,000 number reported from August.

Even better, the unemployment rate dropped one-tenth of a percentage point to hit 4.1%, under the expert forecast, though the rate is still higher than it was a year ago when it sat at 3.8%.

The revisions to the past two jobs reports also came in higher: July’s print was changed to reflect an additional 55,000 jobs, while August’s number was amended higher by 17,000 jobs.

Hourly earnings ticked up slightly, too, by 0.4% in September, one-tenth of a percentage point higher than experts had predicted. All told, average hourly earnings have increased by 4% over the last year, beating out inflation during that period.

“This should put to rest, at least for the next month, the idea that the economy is about to fall of a cliff or that imminent doom is on the horizon,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, noting this report has countered the previous two reports that came in softer than expected.

The better-than-expected federal jobs report predicted by the monthly employment report by payroll company ADP, which showed a gain of 143,000 private sector jobs last month, also beating expectations.

The report marked a rebound after seeing the labor market cool for five straight months, ADP stated, and the number was about 20,000-jobs higher than the median forecast.

Most of the job gains came in the service industry, representing 101,000 of the total print. However, while medium- and large-sized companies gained 64,000 and 86,000 jobs in September, respectively, small companies actually lost jobs.

Interestingly, wages narrowed among those leaving their jobs and those staying at their jobs, with job-changers seeing their wages fall to 6.6% in September from 7.3% in August.

“Stronger hiring didn’t require stronger pay growth last month,” Nela Richardson, ADP’s chief economist, said in a statement. “Typically, workers who change jobs see faster pay growth, but that premium over job-stayers shrank to 1.9%, matching a low we last saw in January.”

Earlier in the week, the BLS’s monthly job openings and labor turnover survey included some very good news, on both the labor and inflation fronts.

The total number of quits for August — the JOLTS report lags a month behind the jobs reports — declined to 3.1 million. Job openings increased from the three-year low in July to break 8 million in August, beating out expectations.

Olivia Cross, an economist at Capital Economics, wrote in an investor’s note that the JOLTS report “provides some reassurance against fears that labor market conditions will deteriorate further, while the sharp fall in the private quits rate suggests that core services inflation will moderate.”

However, most of the job openings came in the construction and government sectors. Taking out those two pieces, job openings actually fell by about 90,000, which indicates the employment landscape has continued to contract somewhat.