US employers added 263,000 new jobs in September as the unemployment rate dipped to 3.5%, the Bureau of Labor Statistics announced on Friday.
The jobs market has shown signs of slowing recently after regaining all the jobs that were lost during the pandemic. September’s gain was down from the 315,000 jobs added in August and far lower than the 420,000 average monthly gain thus far in 2022. But growth has remained robust despite rising interest rates and growing fears of a recession.
How long the job market can maintain its current trajectory is unknown. The Federal Reserve blames the current cost of living crisis in part on a tight labor market and rising wages and has signaled it would like to see hiring fall, and unemployment rise, as it seeks to tamp down inflation.
Inflation is at highs unseen since the 1980s and the Fed is raising rates at their fastest pace in 40 years as it struggles to cool the economy and bring prices back down. “We have to get supply and demand back into alignment and the way we do that is by slowing the economy,” Fed chair Jerome Powell said last month. “Higher interest rates, slower growth, and a softening labor market are all painful for the public that we serve. But they’re not as painful as failing to restore price stability.”
But wages – which rose by an annual rate of 5% in September – are still not keeping pace with inflation – currently at 8.3%. Some economists have argued that corporate profits and supply chain issues are a larger driver of inflation than wages.
The latest jobs report is unlikely to deter the Fed from making another large rate rise when it meets again in November.
There are signs that “cracks” are appearing in the jobs market. Some 219,000 people filed for unemployment insurance in the week ending 1 October, the labor department reported on Thursday – 29,000 more claims than the week before and the highest figure in four months.
Part of that increase was due to Hurricane Fiona, which ravaged Puerto Rico and led to a surge of claims. Hurricane Ian, which has devastated Florida and the Carolinas at the end of September, is also expected to impact the numbers in the weeks ahead.
The number of job openings fell dramatically last month, down to just over 10m, a 10% drop from the 11.17m reported in July but still equal to over one and a half jobs for every person currently looking for work.
Large employers including Ford and Walmart have announced plans to scale back hiring or to layoff workers. US employers announced nearly 30,000 cuts in September, a nearly 68% increase from September last year, according to career services firm Challenger, Gray & Christmas.
It was the fifth month this year that cuts were higher than the corresponding month in 2021. Challenger also reported a sharp slowdown in hiring intentions, with employers announcing in September that they planned to take on 380,014 workers, the lowest September total since 2011.
“Some cracks are beginning to appear in the labor market. Hiring is slowing and downsizing events are beginning to occur,” senior vice president Andrew Challenger said in a statement.
“The cooling housing market and Fed’s rate hikes are leading to job cuts among mortgage staff at banks and lenders. The recession concerns are leading to increased uncertainty, and companies across sectors are beginning to reassess staffing needs,” said Challenger.