Another Month of Solid Hiring Suggests More Big Fed hikes

WASHINGTON (AP) — 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 that hiring fell from 315,000 in August to the weakest monthly gain since April 2021. The unemployment rate dropped from 3.7% to 3.5%, matching a half-century low.

The Fed is hoping that a slower pace of hiring would eventually mean less pressure on employers to raise pay and pass those costs on to their 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.

On Wall Street, stocks tumbled Friday morning — a sign that investors foresee more aggressive Fed rate hikes ahead. The S&P 500 index sank 1.9% in early trading. And the yield on the 2-year Treasury note, which tends to track expectations for Fed actions, rose to 4.31% from 4.26% late Thursday.

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.

It has a long way to go. In August, one key measure of year-over-year inflation, the consumer price index, amounted to 8.3%. And for now, consumer spending — the primary driver of the U.S. economy — is showing resilience. In August, consumers spent a bit more than in July, a sign that the economy was holding up despite rising borrowing rates, violent swings in the stock market and inflated prices for food, rent and other essentials.

Fed Chair Jerome Powell has warned bluntly that the inflation fight will “bring some pain,” notably in the form of layoffs and higher unemployment.

Powell and his colleagues on the Fed’s policymaking committee want to see signs that the abundance of available jobs — there’s currently an average of 1.7 openings 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 fewest since June 2021.

On the other hand, by any standard of history, openings remain extraordinarily high: In records dating to 2000, they had never topped 10 million in a month until last year.

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 blacks 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 employment modestly.