- US job growth exceeds expectations.
- Unemployment rate stays at 3.8%.
- Speculation on interest rate increases.
Last month’s unexpected increase in the number of positions in the United States fueled anticipations that interest rates might increase further.
According to Labour Department figures, employers produced 336,000 new jobs in September, substantially twice the 170,000 expected.
In addition, August data was revised upwards to reflect the creation of 227,000 employment, as opposed to the 187,000 that were initially reported.
The U.S. unemployment rate persisted at 3.8%.
September saw an average monthly gain of 96,000 jobs in the leisure and hospitality sector. Among these, employment in food services and bars increased by 61,000, bringing it back to pre-pandemic levels.
In contrast, despite an increase in employment figures, the monthly increase in wages remained moderate in September, as mean hourly wages increased 4.2% over the previous twelve months.
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The US central bank maintained its key interest rate at a level not modified since last month. The bank is currently evaluating its progress in curbing inflation, which is the rate at which prices increase.
The rate target set by the Federal Reserve ranges from 5.25% to 5.5%, which is the greatest level in over two decades. In March 2022, the bank increased borrowing costs from nearly zero in an effort to rein in escalating prices.
Nonetheless, the resilience of the labour market in response to the Federal Reserve’s efforts to curb the economy has generated speculation that interest rates may persist at elevated levels for a considerable duration.
The 336,000 job gains, according to Janet Mui, chief of market analysis at wealth manager RBC Brewin Dolphin, “exceed even the most optimistic forecast.”
Traders increased their wagers that the central bank will increase interest rates prior to the conclusion of the current year and maintain them at elevated levels for an extended period of time in response to the figures released on Friday.
The United States, similar to numerous other nations, experienced significant workforce reductions during the global Covid-19 pandemic of 2020. However, employment rebounded substantially in 2021 and 2022, coinciding with the relaxation of restrictions.
Although employment expansion has since moderated, the 336,000 figure for September is significantly higher than the pre-pandemic mean.
Strong job growth, according to Brian Coulton, chief economist at ratings agency Fitch, will “maintain upward pressure on wages, increasing the likelihood that the Federal Reserve will need to raise interest rates further.”
Principal Asset Management’s chief global strategist, Seema Shah, concurred that the Federal Reserve would “necessitate additional rate hikes in response,” stating that the data supported the “higher for longer” argument.
Rental and fuel expenses contributed to a September increase in consumer prices that exceeded initial projections.
In the twelve months leading up to August, the inflation rate, which gauges the rate of price increases, rose from 3.2% in July to 3.7%.
Although inflation has declined substantially since its zenith a year ago, it remains above the 2% target set by the Federal Reserve.
