US unemployment growth slowed in September but the unemployment rate unexpectedly edged down, raising expectations the Federal Reserve will continue its pace of monetary tightening.
The US added 263,000 positions last month, according to the Bureau of Labor Statistics, fewer than the 315,000 positions created in August and well below July’s 537,000 rise.
Despite the slower pace of growth, the unemployment rate fell to its pre-pandemic low of 3.5% as the number of Americans either employed or seeking a job slightly dropped.
“While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target,” said Ronald Temple, co-head of multi-asset and head of US equity at Lazard AM.
“The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”
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Seema Shah, chief global strategist at Principal Global Investors, said that almost all the elements in the jobs report are moving in the wrong direction for the Fed.
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“Payrolls were broadly in line with expectations but, importantly in this good news is bad news period, markets were hoping for a downside surprise today. Instead, the number only confirms that the Fed needs to hike rates by a fourth consecutive 0.75% in November,” she said.
“With the Fed’s dot plot pointing to policy rates closer to 5% than 4% next year, we have a market that is wishing for the economy to slow quickly. That is when you know there is only one path ahead: risk assets have further to fall.”
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At 62.3% as of September, the so-called labour force participation rate was still lower than it was prior to the pandemic. The overall labour force declined marginally by 57,000 people.
The leisure and hospitality industry led the job gains, adding 83,000 .This news arrives just days after the release of cooler than expected US labour market figures, which showed that employers had cut more than one million job openings in August — one of the largest monthly declines in two decades.
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