US employment growth cools in September

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US employment growth cools in September

US employment growth cools in September:

The US economy added 134,000 jobs in September, the Department of Labor said Friday. That’s a slowdown from the previous three months and is lower than economists expected.

This news comes as President Donald Trump has repeatedly touted the strong state of the economy and its effect on employment.

The unemployment rate fell to 3.7 percent, matching an 18-year low, but that was largely because people left the workforce rather than finding work.

Fall in unemployment rate to historic low of 3.5 per cent helps keep pressure on Fed to raise rates
Fall in unemployment rate to historic low of 3.5 per cent helps keep pressure on Fed to raise rates

Although the US unemployment rate surprisingly fell in September, the solid pace of job growth in the country slowed, which strengthened predictions that the Federal Reserve will increase interest rates by another 0.75 percentage points at its next meeting in November.

According to the Bureau of Labor Statistics, the largest economy in the world added 263,000 jobs last month, which is significantly less than the 537,000 jobs added in July and well below the 315,000 jobs added in August. The average monthly rate of job growth in 2022 is now 420,000, which is lower than the average monthly pace of 562,000 in 2021.

Although the US unemployment rate surprisingly fell in September, the solid pace of job growth in the country slowed, which strengthened predictions that the Federal Reserve will increase interest rates by another 0.75 percentage points at its next meeting in November.

According to the Bureau of Labor Statistics, the largest economy in the world added 263,000 jobs last month, which is significantly less than the 537,000 jobs added in July and well below the 315,000 jobs added in August. The average monthly rate of job growth in 2022 is now 420,000, which is lower than the average monthly pace of 562,000 in 2021.

 

 

How resilient the US economy is and whether inflation is starting to trend back toward the Fed’s goal rate of 2% are the main topics of discussion.

Despite recent indications that firms are starting to reduce hiring, Friday’s data emphasized that the labor market is still extremely healthy.

This week, fresh statistics revealed that businesses cut more than 1 million job opportunities in August, marking one of the worst monthly decreases in 20 years. As a result, the ratio of open positions to unemployed people dropped from 2 to 1.7.

However, the high incidence of employee turnover suggests that there is still an imbalance between the supply and demand of labor.

According to CME Group, traders in fed funds futures contracts priced in the odds of a 0.75 percentage point rate increase next month at 82% on Friday, up from 75% before the most recent jobs report.

The S&P 500 lost 2.2% in early Wall Street trade on Friday after being roughly flat before to the data release. The yield on US Treasury securities with a two-year maturity, which is susceptible to shifts in policy expectations, increased 0.06 percentage points to 4.31 percent.

A Fed “pivot” is not going to happen any time soon, according to Alex Veroude, chief investment officer for fixed income at Insight Investment.

This week, officials have been categorical that they are not yet considering pausing or reducing their tightening measures, despite the deteriorating global economic outlook and the emergence of stress in the financial system.

Uncomfortably, a lack of workers continues to constrain the labor market. At 62.3% as of September, the so-called labor force participation rate was still lower than it was prior to the outbreak. The size of the labor force as a whole decreased by 57,000 persons.

The leisure and hospitality sector, which added 83,000 posts, led the job growth, followed by the healthcare sector, which had a 60,000 increase in employment. Along with adding jobs, the manufacturing and construction industries also saw a decrease in the number of transportation workers.

The average hourly wage climbed in September at the same 0.3% rate as in the prior month, representing a 5% gain annually.

The Fed is actively working to restrain demand and lessen price pressures through astronomical interest rate increases. The persistently tight labor market, as well as the wage increases that have followed suit as businesses try to attract new hires and retain old ones, are a top concern for the Fed.

The majority of policymakers predict that the federal funds rate will be between 4.25 and 4.5 percent by year’s end, with additional rate increases in early 2023. The benchmark policy rate is anticipated to reach its highest point just around 4.5%.

Most policymakers anticipate that by year’s end, the federal funds rate will be between 4.25 and 4.5 percent, with further rate hikes in early 2023. It is projected that the benchmark policy rate will rise as high as 4.5%.$

Through the pandemic recovery, racial and gender disparities in labor force participation rates remain.
For the civilian population over 16 years old, monthly rates of labor force participation by race and gender from January 2020 to September 2022

The government predicts that in order to combat the greatest inflation in four decades, there will need to be persistent “below-trend” growth as well as job losses. Fed head Jay Powell recently stated that a recession cannot be ruled out.

According to the most recent predictions, which the Fed published last month, officials expect the unemployment rate to rise to just 3.8% by the end of the year before climbing to 4.4% in 2023 and remaining there until 2025.

According to officials, it is possible to control inflation without seeing a more significant increase in unemployment, in part because employers may be reluctant to reduce their workforces given the severity of the labor shortage that has existed since the pandemic’s start.

 

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