The job market cooled slightly in September but continued to show resilience, hampering expectations that the Federal Reserve will reverse course on its streak of interest rate hikes.
The U.S. economy added 263,000 jobs in September and had notable job gains in the leisure and hospitality sector (+83,000) as well as in health care (+60,000), according to a Bureau of Labor Statistics (BLS) report published Friday.
Although jobs remained resilient in September, employers hired 16.5% fewer workers than in August, which saw 315,000 jobs added, according to the BLS report. This brought the labor force participation rate down to 62.3% from 62.4% the month before.
Fewer jobs added in September is a positive sign for Federal Reserve Chairman Jerome Powell, who said he wishes for consecutive month-over-month decreases in inflation before the U.S. Central Bank can be confident that lowering interest rates is appropriate.
The two key economic indicators that Chairman Powell is looking for are a decline in labor force participation and an increase in the unemployment rate.
Despite back-to-back months of falling labor force participation, monthly job growth has remained relatively steady. Monthly job growth averaged 420,000 in 2022 so far, compared to 562,000 per month in 2021.
According to the report, the unemployment rate fell to 3.5% from 3.7% a month earlier, meaning fewer people lost their jobs in September than in the previous month. The number of unemployed persons edged down to 5.8 million.
Average hourly earnings rose by $0.10 cents or 0.3%, matching the prior month’s gain. Over the past 12 months, average wages have increased by 5.0%, according to the report.
“The job market is slowing gracefully, moderating jobs and wage growth smoothly as the Federal Reserve searches for signs of cooling inflation,” said Daniel Zhao, senior economist for Glassdoor. “The job market is doing its part for a soft landing, keeping job gains positive and moderating wage gains.”
The Wall Street mindset is as follows: a bad report equals good news for the stock market, and a good report equals bad news for the stock market.
Friday’s report sent the stock market plummeting off the positive report, with the S&P 500 decreasing by roughly 2.95%, the Dow Jones Industrial Average dropping by 2.4%, and the Nasdaq falling by 3.89%.
“This puts the nail in the coffin for another 75 basis-point rate increase in November,” said Jeffrey Roach, chief economist at LPL Financial.
The Employment Situation for October is scheduled to be released on Friday, November 4, 2022, at 7:30 a.m. (CST).