The growth of new jobs in the US has slowed for a second month, suggesting that the world’s largest economy’s labour market may be beginning to cool.
In September, US firms created 263,000 new employment, the fewest since April 2021. Despite the lower number, economists stated that in order to control fast increasing prices, the US central bank will need to take other steps to slow the economy.
Investors’ anticipation of further interest rate increases led to the dollar strengthening after the announcement. Before the announcement of the jobs data, the pound was above $1.12; as a result of this strengthening, it fell to $1.11. The US central bank is keeping a tight eye on the labour market.
Officials are hoping that the increased borrowing rates will lessen pressure on prices, which are rising at the quickest rate since the 1980s, by reducing demand for expensive things like homes and cars.
They have stated that they aim to avert a severe economic crisis but have cautioned that the slowdown in activity is likely to result in some job losses.
According to analysts, the US Labor Department’s report released on Friday demonstrated that the labour market is still reasonably tight as a backlog of open positions encourages employers to make new hires despite concerns about a broader economic slowdown.
Restaurants, bars, and healthcare organizations were the ones that added the most jobs in September, and the unemployment rate dropped from 3.7% in August to 3.5%, hitting a 50-year low.
A year earlier, the average hourly wage in September was also 5% higher.
Analysts noted that even while that is below the inflation rate, the advances nonetheless put upward pressure on pricing, particularly since the number of people working or looking for work has stubbornly remained below pre-pandemic levels.
According to Richard Flynn, managing director of Charles Schwab UK, “the labour market remains quite solid even though this month’s jobs data is less than the figures published last month.”
“The Fed has made it increasingly evident that a return to lower inflation may come at the expense of the economy experiencing significant weakening. The labour market may decline more in the coming months as rate increases affect the real economy, reflecting investors’ recessionary concerns.”
Despite the recent rise in prices that has reduced purchasing power, consumer spending, which is the main engine of the US economy, has maintained steady.
However, anecdotal reports of job losses are increasing as businesses, particularly those in the housing and technology sectors, announce job cuts or recruiting freezes. This Monday, Peloton revealed the fourth round of job layoffs it has made this year, eliminating 500 positions, or about 12% of its staff.
Additionally, some stores have reduced their recruiting ambitions. Over instance, Walmart announced that it will be hiring 40,000 people for the holiday season, down from 150,000 the year before.