Fed's efforts to slow inflation short, September job growth falls short

Labor Department reports Friday that job growth fell short of expectations in September due to efforts by the Federal ReserveFederal Reserve to slow inflation.

Non-farm payrolls increased by 263,000 for the month, compared to the Dow Jones estimate of 275,000. The unemployment rate was 3.5% compared to the forecast of 3.7%.

September's payroll figure was a deceleration from the 315,000 gain in August and tied for the lowest monthly increase since April 2021.

Average hourly earnings rose by 0.3% on the month, in line with estimates, and 5% from a year ago, an increase that is well above the pre-pandemic norm, but 0.1 percentage point below the forecast.

After the release, stock market futures moved lower.

Leisure and hospitality saw an increase of 83,000, a gain that still left the industry 1.1 million jobs short of February 2020's pre-pandemic levels.

Health care added 60,000, professional and business services rose 46,000 and manufacturing contributed 22,000. Financial activities and transportation and warehousing both saw losses of 8,000 jobs.

The Federal Reserve effort to bring down inflation has reached its highest annual rate in more than 40 years, and comes amid a month long Federal Reserve effort to bring it down. The central bank is expected to hike through at least the end of the year after raising rates five times this year for a total of 3 percentage points.

Despite the increases, job growth had remained relatively strong, as companies have a huge mismatch between supply and demand that has left about 1.7 job openings for every available worker. That has helped drive up wages, but the increase in average hourly earnings has fallen short of the inflation rate, which was most recently at 8.3%.

Chairman Jerome Powell, Chairman of the Fed, said they expect the rate hikes to cause some pain on the economy. In September, Federal Open Market Committee members indicated that they expect the unemployment rate to increase to 4.4% in 2023 and hold around that level before dropping to 4% over the long run.

Markets believe that the Fed will keep its rate hikes up with another 0.75 percentage point increase in November. In December, Traders assigned a 78% chance of a three-quarter point move, and expect another half-point increase in December that would take the federal funds rate to a range of 4.25% -- 4.5%.