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US jobs growth slows as policymakers fight inflation

by Oct 8, 2022business

Jobs growth in the US has slowed for a second month, in a sign that the labour market in the world’s largest economy may be starting to cool.

US employers added 263,000 new jobs in September, the fewest since April 2021.

Despite the lower figure, analysts said the US central bank will need to do more to slow the economy if it wants to rein in rapidly rising prices.

The dollar strengthened following the report, as investors expect interest rates to continue to rise.

This strengthening pushed the pound down to $1.11, having been above $1.12 before the jobs figures were released.

The labour market in the US is being closely watched, as the US central bank raises borrowing costs sharply.


Officials hope the higher interest rates will cool demand for big-ticket items such as homes and cars, and ease the pressures that are pushing up prices at the fastest pace since the 1980s.

They have warned that the slowdown in activity is likely to lead to some job loss, but say they hope to avoid a sharp economic downturn.

Analysts said that Friday’s report from the US Labor Department showed the jobs market remains relatively tight, as a backlog of unfilled positions pushes companies to continue to hire despite fears of wider economic slowdown.

Restaurants, bars and health care firms led the job gains last month, while the unemployment rate fell from 3.7% in August to 3.5%, returning to a 50-year low.

The average hourly wage in September was also 5% higher than a year earlier.

While that lags the inflation rate, analysts said the gains still put upward pressure on prices, especially as the pool of workers with jobs or looking for work has remained stubbornly below pre-pandemic levels.

“Although this month’s jobs report is weaker than the figures recorded last month, the labour market remains relatively strong,” said Richard Flynn, managing director at Charles Schwab UK.

“The Fed has been increasingly clear that substantial weakness in the economy may be the expense for a return to lower inflation. As rate hikes feed through to the real economy in the months ahead, the labour market may weaken further, reflecting investors’ recessionary concerns.”

Consumer spending – the main driver of the US economy – has held up in recent months, despite the spike in prices eroding purchasing power.

But anecdotal reports of job losses are rising, as firms announce job cuts or hiring freezes, especially those in the housing and tech sector. Peloton this week announced its fourth round of job cuts this year, shedding another 500 positions – or roughly 12% of its workforce.

Some retailers have also scaled back hiring plans. Walmart, for example, has said it is hiring 40,000 workers for the holiday season, after taking on 150,000 last year.

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