San Francisco Frontiers - US job gains slow, but not enough to ease inflation worries

President Joe Biden, who has seen his approval erode in the face of surging prices, cheered the data as an "encouraging sign" on the economy's path, even while he said there is more work to do to help American families.

But the central bank likely will want to see more progress on slowing price gains, which have been the fastest in 40 years, before pulling back on its aggressive interest rate increases, and economists say another big hike remains likely next month.

The economy added 263,000 jobs last month, showing a steady slowdown from the blistering pace in 2020 and 2021, the Labor Department said in the closely-watched report. The unemployment rate slipped two-tenths of a percentage point to 3.5 percent.

"Today's jobs numbers are an encouraging sign that we are transitioning to stable, steady growth. And more Americans are working than ever before," Biden said on Twitter. "There's more to do to grow our economy from the bottom up and middle out, but we're making progress."

But of more concern for policymakers, the report showed a 10-cent increase in average hourly earnings in the month to $32.46.

Over the past 12 months, average hourly earnings have increased by 5.0 percent, still high but a slowing from the pace seen over the past year.

The central bankers are watching closely to see if wages continue to accelerate, which would fuel further inflation pressures.

The Fed has raised the benchmark lending rate five times this year and said more tightening will be needed to get inflation down, but acknowledge that the process could cause a painful economic slowdown.

"A moderation in job and wage growth will be welcome developments for Fed officials. However, these data do not change the near-term course of monetary policy," Rubeela Farooqi of High Frequency Economics said in an analysis.

Fed officials in recent comments have made it clear that no single data report will change their trajectory since it will take time for inflation to get back down to the two percent goal, which will require more rate hikes.

- Worker shortage? -

Fed board member Christopher Waller warned that given ongoing price pressures, including from the US housing market, inflation is "not likely to fall quickly."

"We haven't yet made meaningful progress on inflation, and until that progress is both meaningful and persistent, I support continued rate increases," Waller said in a speech Thursday.

Still, Robert Frick, corporate economist with Navy Federal Credit Union, called the September data "a Goldilocks jobs report."

He said it was "cool enough to make the Fed happy that the 'tight' labor market is loosening, and warm enough to satisfy most Americans looking for work, or looking to switch jobs for higher pay."

Jason Furman, a former White House economist, said only two "surprisingly low" inflation reports before the November 1-2 policy meeting could cause the Fed to pivot its stance.

"And while economic forecasting can be difficult, I'm reasonably confident the chances of that happening are precisely 0%," Furman tweeted.

US employers continue to complain that they have difficulty filling open positions, and the Fed wants to see signs of an easing in the tight labor market.

The data showed notable gains in the leisure and hospitality sector and in health care, and a decline in government jobs.

The unemployment rate, which edged up in August as more workers came off the sidelines to join the labor force, slipped back last month, and the participation rate was barely changed at 62.3 percent as the pool of available workers was about steady.

Hurricane Ian, which caused massive devastation, especially in Florida, "had no discernible effect" on the data, which was collected before the storm made landfall.

H.Davis--SFF