The economy added 263,000 new jobs in September, a slowdown from the month before but still a sign of strong growth, according to the latest jobs report from the Bureau of Labor Statistics (BLS).
The unemployment rate decreased slightly to 3.5%, according to the Employment Situation Summary. This came after it had edged up to 3.7% in August.
"The unemployment rate dipped back to 3.5%, equal to the pre-pandemic low, and wage growth remains strong with average hourly earnings up 5% over the past year," Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president and chief economist, said in a statement. "The household sector is in strong shape, which should help to mitigate the extent of an economic downturn.
"The number of job openings decreased in August sharply," Fratantoni continued. "This does suggest that employers are first moving to eliminate those openings and slow the pace of hiring before turning to layoffs as the economy cools."
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Job growth could slow in the coming months
Although job growth remains strong, economists expect it will continue to slow in the months ahead as the Federal Reserve continues to raise interest rates.
"Job growth has averaged 420,000 per month in 2022," Fratantoni said. "While the pace of growth slowed in September to 263,000, this is still faster than can be sustained in the US economy over time. And other data clearly signaling a slowing economy lead us to forecast a sharp drop in job growth over the coming months."
Another economist explained that he does not expect the effects of the Fed’s interest rate hikes to be seen in the form of a job slowdown until the fourth quarter of this year.
"Jobs growth in September was solid, with no signs yet of Fed tightening damaging the labor market," Morning Consult Chief Economist John Leer said in a statement. "But that shouldn’t be surprising, as interest rates impact the economy with long and variable lags. The fourth quarter marks the onset of when we’d expect higher interest rates to start impacting employment."
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Federal Reserve expected to continue raising interest rates
The Fed raised interest rates by 75 basis points at its meeting in September, marking the third consecutive 75-basis point increase and the fifth rate hike this year. The move came as inflation hit 8.3% annually in August. This was a slight improvement from July but still remains near the 40-year high set earlier this year and is much higher than the central bank’s preferred 2% annual average.
The Federal Reserve is expected to continue raising rates, even as the labor market slows, in order to bring inflation back down.
"Don't expect the Fed to change course based on today’s numbers," Leer said. "The Fed’s primary objective right now is taming inflation, although it seems increasingly willing to accept higher unemployment as collateral damage."
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