Washington, Oct 7 (BUS): American employers slowed hiring in September, but added 263,000 jobs, a solid number likely to keep the Federal Reserve on pace to continue aggressively raising interest rates to fight persistently high inflation.
Friday’s government report showed that employment fell from 315,000 in August to the weakest monthly gain since April 2021. The unemployment rate fell from 3.7% to 3.5%, which is equivalent to the lowest level in half a century, the Associated Press (AP) reported.
The Fed hopes that slowing job growth will put less pressure on employers to raise wages and pass those costs on to their customers through price increases – a recipe for higher inflation. But the pace of hiring in September was probably too strong for the central bank’s anti-inflation.
In September, hourly wages rose 5% from a year earlier, the slowest year-over-year pace since December but still hotter than what the Fed wants. The proportion of Americans who either have a job or are looking for a job has fallen slightly, which is a disappointment for those hoping to get more people into the workforce and help alleviate a labor shortage and mounting pressure on wages.
Matt Peron, director of research at Janus Henderson Investors, said the jobs report “was probably still too strong to allow (Fed) policy makers to get much breathing.”
Similarly, Rubeela Farooqi, chief US economist at High Frequency Economics, said she does not expect weak jobs and wage numbers in September to prevent the Federal Reserve from raising its benchmark short-term interest rate in November by an unusually large three-quarters of a point for the fourth time. Straight – and an extra half a point in December.
In the past month, restaurants and bars added 60,000 jobs, as did health care companies. State and local governments cut 27,000 jobs. Retailers, carriers and warehouses cut employment modestly.
Public anxiety has arisen over price hikes and the prospect of a recession with political consequences as President Joe Biden’s Democratic Party struggles to maintain control of Congress in the November midterm elections.
In its epic battle to rein in inflation, the Federal Reserve has raised its benchmark interest rate five times this year. They aim to slow economic growth enough to reduce annual price increases to a target of 2%.
She has a long way to go. In August, one of the key measures of year-over-year inflation, the Consumer Price Index, was 8.3%. Currently, consumer spending – the main driver of the US economy – is showing resilience. In August, consumers spent a bit more than in July, a sign that the economy was holding up despite higher borrowing, violent swings in the stock market, and inflated food prices, rents and other necessities.
Fed Chairman Jerome Powell has explicitly warned that fighting inflation will “bring some pain,” particularly in the form of layoffs and rising unemployment. Some economists still hope that despite persistent inflation pressures, the Fed will still be able to achieve a so-called soft landing: slowing growth enough to tame inflation, without going so far as to drive the economy into recession.
It is a very difficult task. The Federal Reserve is trying to achieve this at a perilous time. The global economy, weakened by food shortages and high energy prices resulting from Russia’s war against Ukraine, may be on the brink of deflation. Kristalina Georgieva, managing director of the International Monetary Fund, warned Thursday that the IMF is lowering its estimate for global economic growth by $4 trillion through 2026 and that “things are likely to get worse before they get better.”
Powell and his colleagues on the Federal Reserve’s policy-making committee want to see signs that the job abundance – there are currently an average of 1.7 jobs for every unemployed American – will steadily decline. Some encouraging news came this week, when the Labor Department reported that job openings fell by 1.1 million in August to 10.1 million, the lowest number since June 2021.
On the other hand, by any standard of history, slots remain unusually high: in records dating back to 2000, they did not exceed 10 million in a month until last year.
Friday’s report emphasized how resilient the labor market is.
“The US labor market continues to slow, but there are no signs that it is disrupting,” said Nick Bunker, Head of Economic Research at Indeed Hiring Lab. “Salaries are no longer growing as fast as we saw last year, but employment is still growing fast.”
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