U.S. employers added 263,000 new jobs in September–a dip from August’s 315,000 jobs, suggesting that the Fed’s rate hikes may have begun to have the intended effect on the labor market.
The Fed has long pointed to the strong job market in justifying their aggressive interest rate raises. Monthly job growth has averaged 420,000 so far this year, less than last year’s average of 562,000 per month in 2021, and jobs are being cut at higher rates than in corresponding months in 2021, with large employers like Walmart and Ford announcing layoffs in an effort to cut costs.
Challenger, Gray, & Christmas, a career services firm, released data showing that U.S. employers increased their cuts by 68% compared to last year, with some 30,000 cuts announced in September alone.
"This is an inflection point," says Erica Groshen, an economist at Cornell University, in an interview with ABC.
“I expect we're going to see some signs of loosening in the labor market. Do I think we're going to drop off a cliff? Probably not. The question is how much will the unemployment rate go up and how quickly?"
Wages rose by an annual rate of 5%, but are still not keeping up with inflation, which currently sits at 8.3%. Experts disagree that wages are the main driver of inflation, with some arguing that inflation is impacted more by issues with supply structures.
“We have to get supply and demand back into alignment and the way we do that is by slowing the economy,” Jerome Powell, the Fed chair, 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.”
The Fed is expected to make another large interest rate hike when it meets again in November. If all goes well, the economy will slow enough to tame inflation without dipping into a recession, a concern Wall Street seemed to be weighing on Friday as stocks took a nosedive.
“Everything hinges on inflation at this point,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. “We do think it's going to moderate over the next few quarters.”
According to the data released by the Dept. of Labor, the biggest employment gains were in the hospitality and medical industries.