Jobs growth in the United States has slowed for the second month in a row, indicating that the world’s largest economy’s labor market may be cooling.
Employers in the United States added 263,000 new jobs in September, the fewest since April 2021.
Despite the lower figure, analysts believe the US Federal Reserve will need to do more to slow the economy if it is to keep rapidly rising prices in check.
The dollar rose after the report because investors expect interest rates to rise further.
The pound fell to $1.11, having been above $1.12 before the employment figures were released.
The US labor market is being closely monitored as the US central bank raises borrowing costs dramatically.
Officials hope that higher interest rates will cool demand for big-ticket items like homes and cars and relieve the pressures driving up prices at the fastest rate since the 1980s.
They have warned that the activity slowdown will likely result in job losses, but they hope to avoid a severe economic downturn.
Analysts said Friday’s Labor Department report showed that the jobs market remains relatively tight, as a backlog of unfilled positions pushes companies to continue hiring despite concerns about a wider economic slowdown.
Last month’s job gains were led by restaurants, bars, and healthcare firms, while the unemployment rate fell from 3.7% in August to 3.5%, returning to a 50-year low.
In September, the average hourly wage was also 5% higher than a year ago.
While this is slower than the inflation rate, analysts say the gains are still putting upward pressure on prices, especially since 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 last month’s figures, the labor market remains relatively strong,” said Richard Flynn, managing director of Charles Schwab UK.
“The Fed has become increasingly clear that significant economic weakness may be the cost of returning to lower inflation. As rate hikes affect the real economy in the coming months, the labor market may weaken further, reflecting investors’ recessionary fears.”
Consumer spending, the main engine of the US economy, has remained stable in recent months, despite rising prices eroding purchasing power.
However, anecdotal reports of job losses are increasing as companies announce job cuts or hiring freezes, particularly in the housing and technology sectors. Peloton announced its fourth round of job cuts this year this week, eliminating 500 positions, or roughly 12% of its workforce.
Some retailers have reduced their hiring plans as well. Walmart, for example, has announced that it will hire 40,000 workers for the holiday season, up from 150,000 last year.