US job growth likely slowed down despite hotter inflation

Despite rising interest rates and scorching-hot inflation, the US job growth in September probably cooled from a frenzied pace earlier this year, but hiring probably remained steady despite the growing headwinds from higher interest rates and scorching inflation.

The Labor Department released its closely watched report on Friday, which was projected to show that payrolls increased by 250,000 last month and that the unemployment rate held steady at 3.7%, according to a median estimate by Refinitiv economists. That would be the lowest monthly job growth since December 2020, as it would drop from 315,000 recorded in August.

Average hourly wages are expected to rise by 0.3% or 5.1% annually.

The labor market is starting to slow down as policymakers try to wrestle inflation, which is still close to a 40 year high, back to 2%, despite the fact that monthly jobs data is important.

On Friday, a hotter than expected figure could solidify another three-quarter percentage point interest rate hike when policymakers meet at the beginning of November. Three straight 75 basis-point increases in June, July and September have already been approved by officials as they try to catch up with runaway inflation and have laid out an aggressive path for the rest of the year.

Stocks sold off ahead of the release of the report, with investors fearing that it could entail a more hawkish move from the Federal Reserve.

The labor market has remained one of the few bright spots in the economy for months, with the economy adding more than 2 million jobs over the first half of the year.

There are growing signs that the labor market is starting to weaken with a number of companies, including Alphabet's Google, Walmart, Apple, Meta and Microsoft, announcing hiring freezes or layoffs in recent weeks.

The number of Americans filing first-time jobs rose to 219,000, a five-week high, as Americans began to increase their jobless claims more than expected last week.

If unemployment benefits continue to climb, it could be a sign that employers are laying off workers as consumers pull back on spending and the economy grinds to a halt. The data shows that it is the lowest level since early in the pandemic, indicating that employers are putting their hiring on the back burner.

During the September press conference, the Post-Meeting Press Conference conceded that higher rates could lead to increases in unemployment. Powell said we need to have softer labor market conditions. We have to get inflation behind us if we want to set ourselves up, really light the way to another period of a very strong labor market. I wish there was a painless way to do that.