Another month of strong US contracting suggests more big Fed hikes

WASHINGTON — U.S. employers cut their hiring in September but still added 263,000 jobs, a strong number that will likely keep the Federal Reserve up to speed to continue raising interest rates aggressively to combat stubbornly high inflation. .

Friday’s government report showed hiring fell from 315,000 in August to the weakest monthly gain since April 2021. The jobless rate fell to 3.5% from 3.7%, matching a half-century low.

The Fed hopes that a slower pace of hiring will eventually mean less pressure on employers to raise wages and pass those costs on to their customers through price increases, a recipe for high inflation. But September’s job growth was probably too strong to satisfy the central bank’s inflation fighters.

Last month, hourly wages rose 5% from a year earlier, the slowest year-on-year pace since December but still higher than the Fed would like. The share of Americans who have jobs or are looking for one fell slightly, a disappointment for those who had hoped more people would enter the labor force and help alleviate worker shortages and upward pressure on wages.

The jobs report “was still probably too strong to allow (the Fed) policymakers much room to breathe,” said Matt Peron, director of research at Janus Henderson Investors.

Similarly, Rubeela Farooqi, chief US economist at High Frequency Economics, said she didn’t think weaker wage and labor numbers in September would stop the Fed from raising its benchmark short-term rate in November by three-quarters. unusually large point numbers for the fourth time in a row, and for an additional half point in December.

On Wall Street, stocks fell Friday morning, a sign investors anticipate more aggressive rate hikes from the Fed. The S&P 500 index sank 1.9% in early trading. And the yield on the 2-year Treasury note, which tends to follow expectations for Fed actions, rose to 4.31% from 4.26% on Thursday night.

The public anxiety that has arisen over high prices and the prospect of a recession also has political consequences as President Joe Biden’s Democratic Party battles to maintain control of Congress in November’s midterm elections.

In its epic battle to control inflation, the Fed has raised its benchmark interest rate five times this year. His goal is to slow economic growth enough to reduce annual price increases toward his 2% target.

He has a long way to go. In August, a key measure of year-on-year inflation, the consumer price index, rose to 8.3%. And for now, consumer spending, the main driver of the US economy, is showing resilience. In August, consumers spent slightly more than in July, a sign that the economy was holding up despite rising interest rates, wild stock market swings and inflated prices for food, rent and other basic items.

Fed Chairman Jerome Powell has bluntly warned that fighting inflation “will bring some pain,” especially in the form of layoffs and higher unemployment. Some economists hold out hope that, despite lingering inflationary pressures, the Fed will still succeed in achieving a so-called soft landing: slowing growth enough to control inflation, without actually pushing the economy into recession.

It is a notoriously difficult task. And the Fed is trying to pull it off at a dangerous time. The world economy, weakened by food shortages and rising energy prices as a result of Russia’s war against Ukraine, may be on the verge of recession. Kristalina Georgieva, CEO of the International Monetary Fund, warned Thursday that the IMF is lowering its estimates of global economic growth by $4 trillion through 2026 and that “things are more likely to get worse before they get better.”

Powell and his colleagues on the Fed’s policymaking committee want to see signs that the abundance of available jobs (there are currently an average of 1.7 openings for every unemployed American) will steadily decline. Some encouraging news came this week, when the Department of Labor reported that job openings fell by 1.1 million in August to 10.1 million, the fewest since June 2021.

On the other hand, by any standard in history, opens remain extraordinarily high: In records going back to 2000, they had never exceeded 10 million in a month until last year.

Last month’s decline in unemployment was widely shared across demographic groups. The Hispanic unemployment rate fell to 3.8%, the lowest level in government records dating back to 1973. Black unemployment also fell, from 6% in August to 5.8% in September, still below above its historical low of 5.1% in November 2019.

In September, restaurants and bars added 60,000 jobs, as did sanitation companies. State and local governments cut 27,000 jobs. Retail, transportation and warehousing companies modestly reduced employment.

Many Americans seem to have decided that there are still plenty of jobs available and that they can take their time accepting one. Among them is Jenny Savitscus of Columbus, Ohio, who recently earned a technology certificate in a program run by Goodwill. Savitscus, 45, who would like a high-tech job, said she’s willing to wait for an employer that offers flexible hours and work-at-home options.

“There are opportunities out there,” he said. “Employers and job seekers are trying to find the right balance” between work and family life. She said that she can afford to wait for the right position because she has two part-time teaching jobs.

Friday’s government report underscored how resilient the labor market remains, even if it is slowing.

“The US labor market continues to slow, but there are no signs that it is stalling,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “Payroll growth is no longer at the speed of a jet we saw last year, but employment continues to grow rapidly.”

Radial, a company that powers the online businesses of Lucky Brands, Tommy Hilfiger and Calvin Klein, is one employer hiring more cautiously. The company plans to hire 15,000 seasonal workers at its 25 warehouses, 7,000 fewer than a year ago, and 2,000 at its customer service centers, said Sabrina Wnorowski, director of human resources for Radial, based in King of Prussia, Pa. .

Wnorowski said the company’s more moderate approach to hiring reflects a renewed focus on adding workers closer to the peak of the holiday season to make them more productive. He noted that online sales growth is slowing and that the tight job market appears to be weakening a bit. Peloton, for example, the maker of high-end exercise equipment, announced Thursday that it will cut 500 jobs, 12% of its workforce.

However, some companies go ahead with hiring. Walt Rowen, president of Susquehanna Glass Co. in Columbia, Pennsylvania, said the company, which makes decorative glass products, needs about 15 temporary workers along with a full-time staff of 40 to 45. Rowen has raised starting pay from around $9 an hour before the pandemic to $14 an hour, and yet still struggling to fill vacancies.

“It’s getting harder and harder,” he said. “You used to interview 10, bring in five and keep three. Now we are interviewing 20, getting five and keeping one.”

AP business journalists Anne D’Innocenzio in New York and Christopher Rugaber in Washington contributed to this report.

Source link

Leave a Reply

Your email address will not be published.