The September job report is out. The US economy added 263,000 in September vs. 315,000 jobs added in August , and the unemployment rate edged down to 3.5 % from 3.7% in August. Notable job gains occurred in leisure and hospitality and in health care. Average hourly earnings for all employees in the private sector rose by $0.1, or 0.3%, to $32.46. Average hourly earnings have increased by 5.0% YoY. In September, average hourly earnings of private-sector production and nonsupervisory employees rose by $0.1 , or 0.4% to $27.77.
The Stock market crashed after the report was out with the Dow Jones Industrial Average down 650 points. This is a pretty good job report. Sure, job growth slowed down a bit but the unemployment rate edges down and wages are still going up. I believe the market actually doesn’t want a good job report right now. A good job report will propel the Fed to keep raising interest rates as the real worry is about inflation. The fact that wages are going up at a pace that’s still far higher than the target 2% inflation is worrisome. This indicates that demand for labor outpaces supply. As mentioned in the job report, the labor force participation rate was little changed at 62.3 percent in September, and the employment-population ratio was unchanged at 60.1 percent. Both measures are 1.1 percentage points below their values in February 2020.
It looks like the US economy has a structural issue of labor participation post pandemic. Instead of having the Fed raising rates to a level that dramatically lowers demand for labor, we shall probably come up with some other solutions such as easier immigration or child care assistance to address labor shortage. I wouldn’t bet on things being changed and implemented so quickly on the policy side though. We are most likely going to see the Fed raising rates to more than 4% by the end of the year.
You may enjoy these
https://www.bridgewater.com/research-and-insights/the-fed-has-to-keep-tightening-until-things-get-worse
https://www.atlantafed.org/news/speeches/2022/10/05/bostic-staying-purposeful-and-resolute-in-the-battle-against-inflation
https://youtu.be/FXZsclE8D_k
I've never seen all fed members perfectly aligned on what they are doing and looking for to slow pace of hiking.