US job growth cools in September

The strong pace of US job growth cooled in September, but the unemployment rate fell unexpectedly, reinforcing expectations that the Federal Reserve will raise interest rates by another 0.75 percentage point in its next meeting in November.

The biggest in the world economy it added 263,000 jobs last month, according to the Bureau of Labor Statistics, down from the 315,000 jobs created in August and well below July’s 537,000 increase. So far in 2022, monthly job growth is averaging 420,000, down from the average monthly pace of 562,000 in 2021.

Despite the slower pace of growth, the jobless rate dipped back to its pre-pandemic low of 3.5 percent as the share of Americans employed or looking for work fell slightly.

“The story is that a 0.75 percentage point increase in November is likely,” said Tiffany Wilding, North America economist at Pimco. “The Fed needs to continue to tighten.”

US central bank officials are actively discussing whether a fourth consecutive jumbo rate hike is necessary next month or whether they can potentially slow down to raise rates in half-point increments. So far this year, the fed has raised its benchmark policy rate from near zero to a range of 3 percent to 3.25 percent.

The debate is based on how resilient the US economy remains and whether inflation is starting to return to the Fed’s 2 percent target.

Friday’s report underscored that the job market remains fairly strong, despite recent signs that employers are starting to cut back on hiring.

Earlier this week, new data showed that companies cut more than 1 million vacancies in August, one of the steepest monthly declines in two decades. That pushed the ratio of job vacancies to unemployed people to 1.7 from 2.

However, workers continue to quit at a high rate, suggesting that labor supply and demand are still out of balance.

Fed funds futures contract traders on Friday priced the odds of a 0.75 percentage point rate hike next month at 82 percent, according to CME Group, from 75 percent before the last jobs report.

The S&P 500 slid 2.2 percent lower in early Wall Street trading on Friday, after being virtually flat before the data release. The two-year US Treasury yield, which is sensitive to changes in policy expectations, rose 0.06 percentage point to 4.31 percent.

According to Alex Veroude, chief investment officer of fixed income at Insight Investment, Friday’s data further solidifies that a Fed “pivot” will not be forthcoming any time soon.

Officials this week have insisted they are even without considering any type of pause or winding down its adjustment plans, even as signs of stress begin to emerge in the financial system and the global economic outlook deteriorates.

It is worrying that the labor market is still hampered by a shortage of workers. As of September, the so-called labor force participation rate was still below its pre-pandemic level, at 62.3 percent. The overall workforce was also reduced by 57,000 people.

Leading the job gains was the leisure and hospitality industry, which added 83,000 jobs, followed by a 60,000 increase in health care employment. The construction and manufacturing sectors also continued to add jobs, while the number of transportation positions decreased.

Median hourly earnings in September increased at the same 0.3 percent rate as in the previous period, translating into a 5 percent annual jump.

The persistently tight labor market, and the wage gains that have followed as companies try to attract new employees and retain old ones, is a major concern for the Federal Reserve, which is actively trying to restrain demand and reduce pressures. on prices through gigantic increases in interest rates. .

By the end of the year, most officials expect the fed funds rate to hover between 4.25% and 4.5%, with further rate hikes in early 2023. The policy rate is expected to benchmark reaches a peak just above 4.5%.

Officials project that their efforts to rein in the worst inflation in four decades will require not only a sustained period of “below trend” growth, but also job losses. a recession cannot be ruled outFed Chairman Jay Powell recently warned.

According to the most recent projections released by the Fed last month, the median forecast among policymakers for the unemployment The rate shows it rising to just 3.8 percent by the end of the year before jumping in 2023 to 4.4 percent and staying at that level through 2025.

Officials have argued that inflation can be brought under control without a more substantial rise in unemployment, not least because employers may be hesitant to cut their workforce given the magnitude of the labor shortage since the start of the pandemic.

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