Jobs report September 2022:

The Labor Department reported Friday that job growth was slightly below expectations in September and the unemployment rate fell despite efforts by the Federal Reserve to slow the economy.

Nonfarm payrolls increased by 263,000 in the month, compared to the Dow Jones estimate of 275,000.

The unemployment rate came in at 3.5% versus expectations of 3.7% as the labor force participation rate fell to 62.3% and the labor force size decreased by 57,000. A more blanket measure involving discouraged workers and those taking part-time jobs for economic reasons saw a sharper decline, to 6.7% from 7%.

Payroll figures in September posted a slowdown from the 315,000 increase in August and tied for the lowest monthly increase since April 2021.

In closely watched wage figures, average hourly earnings rose 0.3% in the month, in line with estimates, and 5% from a year ago, an increase still well above the pre-pandemic benchmark but 0.1 percentage point lower than expectations.

Stock market futures contracts Scroll down after release While government bond yields rose. Investors have been looking at the numbers for an indication of how the Federal Reserve will react as it tries to rein in inflation.

“This puts a nail in the coffin for 75 more.” [basis point rate increase] In November, Jeffrey Roach, chief economist at LPL Financial, said the basis point is 0.01 percentage point.

From a sector point of view, leisure and hospitality led the gains with an increase of 83,000, a gain that still leaves the industry below pre-pandemic levels in February 2020.

Elsewhere, health care added 60 thousand, professional and business services increased 46 thousand, and manufacturing contributed 22 thousand. Construction rose 19,000 and wholesale trade rose 11,000.

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A 25,000 drop in government jobs was a big contributor to the miss-expected report. Employment at the state and local levels is highly seasonal, so the decline points to a report that was otherwise largely in line with expectations and showing labor market resilience.

Also on the downside, the financial, transportation, and warehousing activities saw the loss of 8,000 jobs.

The report comes amid months of the Federal Reserve’s efforts to bring down inflation, which is near its highest annual rate in more than 40 years. The central bank has raised interest rates five times this year by a total of 3 percentage points and is expected to keep rising until at least the end of the year.

Despite the increases, job growth remained relatively strong as companies faced a massive mismatch between supply and demand leaving about 1.7 jobs for every available worker. This in turn helped raise wages, although the increase in average hourly earnings is much less than the inflation rate, which was recently at 8.3%.

Fed officials, including Chairman Jerome Powell, said they expect the rate hike to cause “some pain” to the economy. Members of the Federal Open Market Committee indicated in September that they expect the unemployment rate to rise to 4.4% in 2023 and stabilize around that level before falling to 4% over the long term.

Markets widely expect the Fed to continue the pace of rate hikes with another 0.75 percentage point increase in November. Traders assigned a 78% chance of a three-quarter point move after the jobs numbers, and expect another half-point increase in December that would take the fed funds rate into the 4.25%-4.5% range.

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