Expectations of more interest rate increases were stoked by the US jobs report last month, which exceeded estimates.
As per the Labour Department’s disclosed numbers, employers added 336,000 positions in September, which is twice the 170,000 predicted. The updated August data indicated a higher number of jobs created—227,000 as opposed to the 187,000 initially reported. 3.8% was the current US unemployment rate.
With employment in food services and bars increasing by 61,000 during the month and reaching pre-pandemic levels, the leisure and hospitality industry alone created 96,000 jobs in September, above the average monthly rise. The average hourly wage increased 4.2% in the year leading up to September, although monthly wage growth remained modest despite the sharp increase in employment.
While it evaluates whether it has done enough to stabilize inflation—the pace at which prices rise—the US central bank held its benchmark interest rate steady last month. With rates between 5.25% and 5.5%, the Federal Reserve is targeting the highest level in almost 20 years. To try to contain growing prices, the bank increased borrowing fees from almost zero in March 2022.
But despite the Federal Reserve’s efforts to slow down the economy, the jobs market has proven resilient, and this has led to speculation that interest rates may stay low for some time. Wealth management RBC Brewin Dolphin’s head of market analysis, Janet Mui, stated that the 336,000 employment gains “blows past even the most bullish estimate.”
Trades increased their wagers that the central bank will hike interest rates before the year ends and maintain them high for a lengthier period the following year in response to recent statistics.
Also, you can read How Employees Became “Unsackable” Amid an Impending Recession.
The COVID pandemic that swept the globe in 2020 caused significant job losses in the US and many other nations, but as limitations were loosened in 2021 and 2022, employment sharply bounced back. The increase in jobs has now plateaued, but the 336,000 jobs in September is still significantly higher than the pre-pandemic norm.
The strong rise in employment, according to chief economist Brian Coulton of the rating agency Fitch, will “maintain upward pressure on wages, raising the possibility that the Fed may require additional interest rate increases.”
Asserting that the numbers supported the “higher for longer narrative,” Seema Shah, chief global strategist at Principal Asset Management, concurred that the Federal Reserve would “need to respond with more rate hikes.”
Due to increased fuel and rental expenses, consumer prices in the US increased more than anticipated in September. With respect to the rate of increase in prices, the inflation rate increased from 3.2% in July to 3.7% in the year ending in August. The Federal Reserve’s goal inflation rate of 2% is still exceeded by inflation despite a dramatic decline from the peak last year.
The latest US jobs report has fueled expectations of an interest rate hike, with many analysts predicting that the Federal Reserve will act sooner rather than later. According to the data, the US added 943,000 jobs in July, which was higher than anticipated and demonstrated that the economy is still recovering from the pandemic.
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