Today the Bureau of Labor Statistics released its latest report on the Employment Situation in September 2022. The report shows that the labor market remains strong despite the recent large hikes in interest rates undertaken by the Federal Reserve to tame inflation and slow the economy. The unemployment rate dropped to 3.5 percent, matching the historically low level it reached in July. The employer survey found that the economy added 263,000 jobs in September. Together the two surveys show that the labor market remains strong even as there are fears that higher interest rates are starting to create headwinds in the broader economy.
Here are some other details from the report and thoughts about what it means for the economy going forward:
- The jobs growth in the report at 263,000 is more in line with typical levels of growth in strong labor markets rather than the fast growth that we have seen coming from the pandemic. This report also included revisions in the job numbers for the previous two months, showing that 11,000 jobs were added in July (537,000 from 526,000) and no change to the August number (315,000). This brings the three-month average to nearly 372,000 jobs. The labor market continues to grow at a very strong pace, easing fears that the economy is in a recession.
- In another encouraging sign, job growth remained strong across most sectors of the economy. It is worth closely watching jobs in the construction sector as higher interest rates are starting to reduce home-building activity. However, the report found that employment in construction increased by 19,000 jobs in September.
- Earlier this week the BLS released its Job Opening and Labor Turnover Survey (JOLTS) with data from the last day of August. The report found that job openings reduced dramatically during the month to 10.1 million from 11.2 million at the end of July. This is good news as it is bringing the ratio of job openings to unemployed workers back to normal levels. With 5.75 million unemployed workers, there are still nearly 1.8 open jobs per unemployed worker. An ideal path for the labor market would be for employment to continue growing as the number of job openings falls closer to the number of unemployed workers. The JOLTS report found that both new hires and separations changed little from previous months despite the decline in job openings.
- In terms of future interest rate increases, the strength in the labor market should not give the Federal Reserve any reason to slow its planned path of interest rate increases.
- In terms of inflation, the report shows that wages grew at 0.3 percent over the previous month and 5.0 percent over the past year. While this is rapid wage growth, it remains below price inflation over the past year.
