U.S. employers continued to hire at a solid pace last month and the jobless rate unexpectedly returned to a historic low, indicating a sturdy labor market that puts the inflation-focused Federal Reserve on course for another outsize interest-rate hike.
The unemployment rate unexpectedly dropped to 3.5%, matching a five-decade low. Average hourly earnings rose firmly, a Labor Department report showed Friday.
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Hiring was relatively broad based, led by gains in leisure and hospitality and healthcare. Meanwhile, employment in transportation and warehousing and financial activities declined.
The figures are the latest illustration of the perennial strength of the U.S. job market. While there have been some indications of moderating labor demand — most notably a recent decline in
The Fed, meanwhile, is hoping to see a significant softening in labor market conditions, with the goal of cooling wage growth and ultimately inflation. While the payrolls advance was the smallest since April 2021, policy makers are watching to see if their rate hikes spur an increase in the unemployment rate.
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The jobs report showed average hourly earnings were up 0.3% from August and up 5% from a year earlier, a slight deceleration from the prior month but still historically elevated. The solid increase suggests the Fed will have to continue to raise interest rates as it aims to rein in rapid wage growth that has bolstered household spending.
The report is welcome news for President Joe Biden, who has emphasized the strength of the labor market ahead of midterm elections next month. High inflation has taken a toll on his approval rating and on Democrats' chances of retaining thin majorities in Congress.
