The unemployment rate dropped to 3.5% in September, while payrolls increased by 263,000 due to the robust state of the job market

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Last Updated on October 7, 2022 by Bitfinsider

The Labor Department announced on Friday that job growth in September fell slightly short of estimates and the unemployment rate decreased despite efforts by the Federal Reserve to slow the economy.

The rise in nonfarm payrolls for the month was 263,000, compared to the Dow Jones forecast of 275,000.

The unemployment rate was 3.5% instead of the anticipated 3.7%, as the labor force participation rate declined to 62.3% and the labor force size decreased by 57,000. A broader measure that includes discouraged workers and those who hold part-time jobs for economic reasons showed an even steeper decrease, from 7% to 6.7%.

September’s payroll data was a decrease from August’s 315,000 increase and was tied with April 2021 for the lowest monthly growth since April 2021.

Depending on how optimistic or pessimistic you are about the economy, this study has something for everyone, according to Liz Ann Sonders, chief financial strategist at Charles Schwab. Clearly, the market is unhappy, but the market is unhappy in general at the moment.

Futures on the stock market swung lower following the news, while yields on government bonds increased. Investors were examining the statistics for a clue as to how the Federal Reserve will respond in its efforts to curb inflation.

This eliminates the possibility of another 75-basis-point rate hike in November, according to Jeffrey Roach, senior economist at LPL Financial. A basis point is 0.01 percentage point.

Average hourly earnings climbed 0.3% month-over-month, in line with expectations, and 5% year-over-year, which is still significantly above the pre-pandemic norm but 0.1% less than anticipated.

Leisure and hospitality led the improvements with a surge of 83,000 employment, although the industry is still 1.1 million jobs short of its pre-pandemic levels in February 2020.

In addition, the health care sector generated 60,000 jobs, professional and commercial services increased by 46,000, and manufacturing added 20,000. Construction increased by 19,000, while wholesale commerce increased by 11,000.

A decrease of 25,000 government employment was a significant factor in the report falling short of forecasts. State and local hiring is extremely seasonal, so the fall is indicative of a report that was otherwise substantially in line with forecasts and demonstrates a strong labor market.

Also on the negative side, 8,000 jobs were lost in financial activities and transportation and storage.

Roach stated that the research “just demonstrates that despite the headwinds of the Russia-Ukraine conflict, rising interest rates, and a slowing property market, the consumer and business sectors have been very robust.” It might contribute to the narrative of a smooth landing for the economy, which for a time looked elusive.

The study coincides with a multi-month campaign by the Federal Reserve to reduce inflation, which is nearing its highest annual rate in more than four decades. The Federal Reserve has increased interest rates five times this year for a total of three percentage points, and further increases are anticipated through at least the end of the year.

Despite the increases, employment growth has remained relatively robust as employers contend with a significant mismatch between supply and demand, resulting in around 1,7 job opportunities for each available worker. In turn, this has contributed to pay growth, although the increase in average hourly earnings has lagged far behind the inflation rate, which was 8.3% as of the most recent data available.

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