10 October 2022 | Other

The US labor market remains resilient, but is showing some signs of cooling

The economy added 263,000 jobs in September, the Bureau of Labor Statistics said Friday, slightly more than economists had expected.

Despite the fact that the indicator is still stable, it marks a fall for the second month in a row. This, combined with a sharp drop in job openings, points to a slowdown in the labor market, the result the Fed is aiming for in its fight against inflation.

"The labor market is slowing, with jobs and wage growth easing as the Fed looks for signs of slowing inflation," Daniel Zhao, senior economist at Glassdoor, said in a statement. "The labor market is contributing to the soft landing by maintaining positive job growth and holding back wage growth."

The unemployment rate fell to a half-century low of 3.5% in September as a result of a decline in the number of people looking for work.

"The Fed is looking at this and other labor market data, as well as still strong inflationary pressures, and will continue to believe it needs to raise interest rates," said Mark Hamrick, senior economic analyst at Bankrate.

The Fed will meet on November 2 to discuss monetary policy and is expected to raise its benchmark interest rate by three-quarters of a point for the fourth consecutive time.

The labor market has been in crisis for the past two years, recovering from the loss of more than 20 million jobs at the start of the Covid-19 pandemic. The resurgence has been swift, with US employers adding on average about 562,000 jobs per month last year and 420,000 jobs per month this year.

But that pace is unsustainable, said Dean Baker, senior economist at the Center for Economic and Policy Research. If monthly job growth drops to 200,000, or about 150,000, that will likely be better for the Fed, he said. Prior to the pandemic, average monthly job growth was below 200,000.

While private sector employment returned to pre-pandemic levels at the beginning of this year, public sector employment remains nearly 600,000 jobs, or 2.6%, below February 2020 levels.

Employment is on the rise again in industries hit hard during the pandemic, including health care and food service, but more interest-sensitive industries such as finance, housing and car dealerships are in decline.

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