A “We Are Hiring” sign is posted in front of a restaurant in Los Angeles, California on August 17, 2022.
Frederic J. Brown/AFP/Getty Images
The US created 263,000 new jobs in September, beating the average estimate of 250,000 payrolls.
The unemployment rate fell to 3.5%, landing below economists’ forecasts.
The print shows job growth continuing to weaken as the Fed ramps up its effort to slow the economy.
The white-hot labor market is on its way out.
The US economy added 263,000 nonfarm payrolls in September, the Bureau of Labor Statistics announced Friday morning. Economists surveyed by Bloomberg expected jobs to increase by 250,000. The print shows payroll growth slowing into fall amid easing consumer demand, rising interest rates, and fears of an impending downturn.
The August increase was unrevised from an initial reading of 315,000 new jobs. The July count was updated one last time to 537,000 from 526,000.
The unemployment rate fell to 3.5% through the month, beating the median forecast of 3.7%. The rate edged slightly higher earlier in the summer as more Americans started looking for work; the unemployment rate counts workers actively seeking jobs, and as more join the workforce, that can lead to a higher share of unemployed job seekers.
The latest reading of the labor force participation rate suggests the return of sidelined workers will be a slow one. The measure fell to 62.3% from 62.4% through September.
After a transcendent recovery and more than a year of a so-called labor shortage, the labor market is easing up. Higher interest rates started to weigh on demand through the summer, leading companies to brace for weaker revenues. As spending wanes, firms are forced to either accept lower profits or cut costs, and such cuts typically affect headcount.
Hiring plans have changed accordingly. Job creation has eased from the extraordinary pace seen last year, and while the September gain remains historically strong, it extends a slowdown that kicked off in early 2022.
Wages extended their climb from the summer, but at a slower pace than in August. Average hourly earnings gained by $0.10, or 0.3%, to $32.46 last month, matching the median forecast. Pay growth, like job creation, has eased up in recent months as the labor market creeps toward a new normal, and as inflation remains elevated, the slowdown risks leaving households with even less buying power than before.
Job openings data published earlier in the week showed firms’ plans for future hiring similarly easing up. Openings plunged to 10.1 million from 11.2 million in August, staging the largest one-month drop since the first months of the pandemic recession in 2020.
The shift into a more normal labor market will likely charge well into 2023. Fed Chair Jerome Powell noted in a September 21 press conference that “some softening of labor market conditions” is likely as the central bank lifts rates higher and puts more of a drag on hiring. That will leave some households to bear economic pain, but failure to cool inflation would present a much more significant danger, he added.
Still, the central bank’s own projections spell out an unappealing outlook for the labor market. The median estimates from the Federal Open Market Committee see the unemployment rate climbing to 4.4% in 2023 and staying there through 2024 as inflation eases up. If that projection proves correct, the increase in unemployment from July’s 3.5% rate would mean about 1.5 million more unemployed Americans.
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