The US labor market is doing well, non-farm payrolls are growing steadily and the unemployment rate is falling.

(Added details, analyst comments, updated markets)

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Non-farm payrolls increase by 263,000 in September

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The unemployment rate drops from 3.7% to 3.5%.

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The average hourly wage increases by 0.3%; up 5.0% year-on-year

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The average workweek remains unchanged 34.5 hours

WASHINGTON, Oct 7 (Reuters) – U.S. job growth slowed moderately in September while the unemployment rate fell 3.5%, indicating a tight labor market that is keeping the Federal Reserve in its aggressive monetary tightening campaign for some time.

Although the drop in the unemployment rate, which was 3.7% in August, was partly due to people leaving the labor force, fewer Americans worked part time for economic reasons last month, according to the highly-watched Department of Labor jobs report released on Friday. The job market continues to show resilience despite the Fed’s sharp interest rate hikes, which are dampening demand.

“The labor market remains stubbornly hot,” said Michael Feroli, chief US economist at JPMorgan New York. “The super-tight hiring conditions are generating growth in wages and nominal incomes that do not bring inflation down to a more acceptable rate.”

Non-farm payrolls rose by 263,000 jobs last month after an unrevised rise of 315,000 jobs in August, according to the establishment survey. Although this figure is the lowest since April 2021, employment gains exceeded the monthly average of 167,000 in the 2010s. Employment growth has averaged 420,000 per month this year.

Economists polled by Reuters had forecast 250,000 jobs added, with estimates ranging from a low of 127,000 to a high of 375,000. The unemployment rate remained unchanged at 3.7%.

President Joe Biden said the job gains were “an encouraging sign that we are transitioning to stable and steady growth.”

The jobs report suggested the economy was not in recession despite the contraction in gross domestic product in the first half. But the risks of a slowdown next year are growing as the Fed steps up its fight against inflation.

The US central bank has raised its key rate, which was close to zero at the start of the year, to bring it to the current range of 3.00% to 3.25%. September’s consumer price report, to be released next Thursday, will help policymakers assess their progress in controlling inflation ahead of their November 1-2 policy meeting.

The overall employment increase last month was led by the leisure and hospitality industry, where the workforce increased by 83,000 jobs. Most of the gains were recorded in restaurants and bars. Nonetheless, employment in the leisure and hospitality sector remains 1.1 million jobs below its pre-pandemic level.

Health care added 60,000 jobs in September, bringing employment in this sector back to pre-pandemic levels. Employment in the professional and business services industry increased by 46,000 jobs. Manufacturing added 22,000 jobs, while construction added 19,000, despite the housing market being hit by rising borrowing costs.

Gains were also recorded in the wholesale trade sector, but the financial activities industry lost 8,000 jobs, while the transportation and warehousing sector lost 7,900. retail decreased by 1,100 positions. The government payroll has fallen by 25,000 jobs.

“The economy did not fall into recession in the first half of 2022, nor in the third quarter,” said Brian Bethune, professor of economics at Boston College. “Yet inexperienced recession predictors keep pushing their recession date into the future.”

Wall Street stocks were trading lower. The dollar rose against a basket of currencies. US Treasury prices have fallen.

WOMEN LEAVING THE LABOR MARKET

According to the CME’s FedWatch tool, financial markets have nearly priced in a fourth 75 basis point rate hike at the Fed meeting next month.

The resilience of the labor market has been attributed to companies’ reluctance to lay off workers after last year’s hiring difficulties as the COVID-19 pandemic forced some people out of the workforce, in part due to illness. prolonged caused by the virus.

While government data this week showed job vacancies fell by 1.1 million, the biggest drop since April 2020, to 10.1 million on the last day of August, there are still 4 million more job vacancies than unemployed Americans. A survey by the Institute for Supply Management on Wednesday also showed that several service industries reported labor shortages in September.

Economists say companies filled open positions as they scrambled to increase their workforce to meet increased demand for their products, leading to higher job creation.

The household survey from which the unemployment rate is drawn showed that 57,000 people left the labor force last month, helping to lower the unemployment rate. Around 390,000 women aged 20 and over have lowered their activity rate.

As a result, the labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, slipped to 62.3% from 62.4% in August. It is 1.1 percentage points lower than in February 2020.

The labor force participation rate for women aged 20 or over fell to 58.0% from 58.4% in August.

Other household survey details were solid. Household employment rose sharply and the number of people working part-time for economic reasons fell by 306,000 to 3.8 million.

This led to a broader measure of unemployment, which includes people who want to work but have given up looking and those working part-time because they cannot find a full-time job, down 6.7% from 7, 0% in August.

With the labor market still tight, wage gains remained solid. Average hourly earnings rose 0.3% after a similar increase in August. This lowered the annual wage increase to 5.0%, from 5.2% in August. The average workweek remained unchanged at 34.5 hours for the fourth consecutive month.

Although wage growth has slowed since peaking at 5.6% in March, the Atlanta Fed’s wage indicator, considered a more reliable measure because it controls for compositional effects such as the level of skill, occupation and geography, stands at 6.7%.

“The good news from a growth perspective is that the strength of the labor market is keeping aggregate household wages in positive territory, even after taking into account high inflation,” said Eric Winograd, senior economist at AllianceBernstein New York.

“That’s a big argument for the possibility of an economic soft landing or at least a soft landing.”