WASHINGTON – America’s employers slowed hiring in September but still added 263,000 jobs, encouraging news that could mean the Federal Reserve’s drive to cool the labor market and tame inflation is starting to make progress.
A government report on Friday showed that job gains last month slowed from 315,000 in August and that the unemployment rate fell from 3.7% to 3.5%, the lowest in half a century.
A slightly more moderate hiring pace in September could be welcomed by the Fed, which is trying to rein in the economy enough to curb the worst inflation in four decades without triggering a recession. Slower job growth will mean less pressure on employers to raise wages and pass those costs on to their customers through higher prices — a recipe for high inflation.
Public anxiety over high prices and the prospect of a recession also has political ramifications as President Joe Biden’s Democratic Party battles to retain control of Congress in November’s midterm elections.
In its epic struggle to contain inflation, the Fed has raised its key interest rate five times this year. It aims to slow economic growth enough to reduce annual price growth to a target of 2%.
There is a long road ahead. In August, one of the main indicators of annual inflation — the consumer price index — amounted to 8.3%. And for now, consumer spending — the main driver of the U.S. economy — is showing some resilience. Consumers spent slightly more in August than in July, suggesting the economy is holding up despite rising borrowing rates, strong stock market swings and higher prices for food, rent and other essentials.
Fed Chairman Jerome Powell openly warned that the fight against inflation “will bring pain”, in particular, in the form of layoffs and rising unemployment. Some economists remain hopeful that despite persistent inflationary pressures, the Fed will still manage to achieve a so-called soft landing: slowing growth enough to tame inflation without going so far as to tip the economy into recession.
This is, as you know, a difficult task. And the Fed is trying to achieve this in a difficult time. The global economy, weakened by food shortages and rising energy prices as a result of Russia’s war against Ukraine, may be on the brink of recession. Kristalina Georgieva, managing director of the International Monetary Fund, warned on Thursday that the IMF is lowering its estimates of global economic growth by $4 trillion by 2026 and that “things are likely to get worse before they get better.”
Powell and his colleagues on the Fed’s policy committee want to see signs that the number of jobs — currently an average of 1.7 job openings for every unemployed American — will steadily decline. There was encouraging news this week when the Labor Department reported that job postings fell by 1.1 million to 10.1 million in August, the smallest reading since June 2021.
Nick Bunker, head of economic research at Indeed Hiring Lab, suggested that among the items on the “soft-landing flight checklist” is “a drop in job openings without a jump in the unemployment rate, which is what we’ve seen the last few months.”
On the other hand, by any standard of history, the number of discoveries remains extremely high: in records dating back to 2000, they had never exceeded 10 million per month until last year.
Economist Daniel Zhao of employment website Glassdoor argued that the focus on the job market may be overblown. Regardless of what happens to jobs and wages, Zhao suggests, Fed policymakers are unlikely to end their rate-raising campaign until they see evidence that they are actually achieving their goal.
“They want inflation to slow down,” he said.
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