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US Economy Adds 263,000 New Jobs in September as Labor Market Conditions Soften

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The U.S. economy added 263,000 new jobs in September, down from an upwardly revised print of 537,000 in August, according to the Bureau of Labor Statistics (BLS). The market had forecast 250,000 new jobs last month. 

The unemployment rate fell to 3.5 percent, down from 3.7 percent in August. This came in line with economists’ expectations. 

The labor force participation rate edged down to 62.3 percent. The average hourly earnings eased to 5 percent year-over-year, down from 5.2 percent. Average weekly hours were unchanged at 34.5. 

‘Cracks Are Beginning to Appear’  

Based on the latest wave of jobs data, some market analysts contended that these could be signs that cracks are forming in the labor market.  

In August, the number of job openings cratered to 10.1 million, according to the Bureau of Labor Statistics (BLS). The reading was the lowest level since June 2021 and represented the biggest single-month decline on record. The number of job quits edged up to nearly 4.2 million in August, leaving the quit rate unchanged at 2.7 percent.  

Initial jobless claims shot up to 219,000 for the week ending Oct. 1, topping the market estimate of 203,000 (pdf). The number of Americans filing for new unemployment benefits had been on a steady decline for six of the last eight weeks. Continuing jobless claims climbed to 1.361 million, while the four-week average, which removes week-to-week volatility, was relatively flat at 206,500.

Last month, U.S.-based companies announced intentions to slash nearly 30,000 jobs from their payrolls, the largest figure in three months, suggesting that hiring is slowing down and downsizing is starting to unfold. In addition, businesses announced plans to hire more than 380,000 workers, the lowest print since 2011.  

“Some cracks are beginning to appear in the labor market. Hiring is slowing and downsizing events are beginning to occur,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, Inc., in a statement.  

Moreover, the Institute for Supply Management’s Manufacturing Employment subindex plunged from 54.2 in August to 48.7, highlighting another decline in employment. However, the ISM Non-Manufacturing Employment subindex rose from 50.2 to 50.3 during the same month-over-month span.  

“Following four straight months of panelists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand. Many Business Survey Committee panelists’ companies are now managing head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand more uncertain,” said Timothy R. Fiore, chair of the ISM, in a news release.

Rising Unemployment to Fight Inflation  

According to the September Summary of Economic Projections—the dot plot—the median unemployment was projected to rise to 4.4 percent in 2023, 4.4 percent in 2024, and 4.3 percent in 2025.  

The objective is to soften labor conditions to help fight inflation, something that multiple central bank officials have discussed.   

Speaking at the Greater Boston Chamber of Commerce, Boston Fed Bank President Susan Collins noted that higher joblessness is necessary to bring inflation down.  

“Accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate,” she said late last month.   

Fed Chair Jerome Powell was candid during the post-Federal Open Market Committee (FOMC) policy meeting press conference, telling reporters that “the chances of a soft landing are likely to diminish.” This would result in slower economic growth and a “modest” jump in unemployment.  

“We have got to get inflation behind us,” Powell said. “I wish there were a painless way to do that. There isn’t.”  

Not everyone is convinced this is a realistic or fact-based strategy.  

“We are skeptical of the Fed’s war on jobs as the solution to high inflation given that labor shortages are at the core of supply chain driven inflation,” said Bryce Doty, the senior vice president and senior portfolio manager at Sit Fixed Income Advisors, in a note.  

Jeremy Siegel, the eminent Wharton Business School professor, thinks the Fed is “talking way too tough” and should be more concerned about triggering a recession rather than inflation.  

“Chairman Powell talked quite a bit about JOLTS data—the job opening and labor turnover data. How tight it is. Interesting thing, I look back a year ago September, it was exactly as tight as it is today. And he never said anything about inflation. What’s caused him to change his mind? It’s the same data,” Siegel told CNBC.  

But former Treasury Secretary Larry Summers disagrees, telling the Financial Times that a 6 percent unemployment rate and a recession are critical to reining in surging inflation.   

“I would be very surprised if we were to simultaneously—as the Fed believes or the Fed forecasts—bring inflation down to something approaching the 2% range and, at the same time, see unemployment rise no higher than 4.4%,” he told the newspaper. “It continues to be my view that we are unlikely to achieve inflation stability without a recession of a magnitude that would take unemployment towards the 6% range.”  

The next two-day FOMC meeting is scheduled for Nov. 1 and 2. The Fed is expected to pull the trigger on a 75-basis-point rate hike next month, according to the CME FedWatch Tool.

Andrew Moran

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Andrew Moran covers business, economics, and finance. He has been a writer and reporter for more than a decade in Toronto, with bylines on Liberty Nation, Digital Journal, and Career Addict. He is also the author of “The War on Cash.”



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