New jobs report suggests further Fed hikes coming

Payroll growth slowed; jobless rate matches half-century low

WASHINGTON — America’s employers slowed their hiring in September but still added 263,000 jobs, a solid figure that will likely keep the Federal Reserve on pace to keep raising interest rates aggressively to fight persistently high inflation.

Friday’s government report showed hiring fell from 315,000 in August to the weakest monthly gain since April 2021.

The unemployment rate also dropped from 3.7% to 3.5%, matching a half-century low.

The Fed is hoping a slower pace of hiring would eventually mean less pressure on employers to raise pay and pass those costs on to customers through price increases — a recipe for high inflation. But September’s job growth was likely too robust to satisfy the central bank’s inflation fighters.

Last month, hourly wages rose 5% from a year earlier, the slowest year-over-year pace since December but still hotter than the Fed would want. The proportion of Americans who either have a job or are looking for one slipped slightly, a disappointment for those hoping that more people would enter the labor force and help ease worker shortages and upward pressure on wages.

The jobs report “was still likely too strong to allow (Fed) policymakers much breathing room,” said Matt Peron, director of research at Janus Henderson Investors.

Likewise, Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said she didn’t think September’s softer jobs and wage numbers would stop the Fed from raising its benchmark short-term rate in November by an unusually large three-quarters of a point for a fourth consecutive time — and by an additional half-point in December.

The public anxiety that has arisen over high prices and the prospect of a recession is also carrying political consequences as President Joe Biden’s Democratic Party struggles to maintain control of Congress in November’s midterm elections.

In its epic battle to rein in inflation, the Fed has raised its benchmark interest rate five times this year. It is aiming to slow economic growth enough to reduce annual price increases back toward its 2% target.

Last month’s decline in unemployment was widely shared across demographic groups. The jobless rate for Hispanics tumbled to 3.8%, the lowest level in government records dating to 1973. Unemployment for Black Americans also fell, from 6% in August to 5.8% in September, still above its record low of 5.1% in November 2019.

In September, restaurants and bars added 60,000 jobs, as did health care companies. State and local governments cut 27,000 jobs. Retailers, transportation and warehouse companies reduced staffs modestly.

Friday’s government report underscored how resilient the job market remains even if it may be slowing.

“The U.S. labor market continues to decelerate, but there are no signs that it’s stalling out,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Payroll growth is no longer at the jet speed we saw last year, but employment is still growing quickly.”