Although the Federal Reserve has attempted to slow the economy to get a handle on inflation, the unemployment rate actually declined in September. It was forecasted that the unemployment rate would be 3.7%, however, for the month of September, it was 3.5%.
The main reason for the drop in the unemployment rate is partly due to the number of people leaving the workforce. The labor force participation rate decreased to 62.3% and with a total decrease of 57,000. The Labor Department’s employment report showed that fewer Americans are working part-time because of economic reasons.
We have also seen average hourly earnings increase by 0.3% for the month of September, which is about a 5% jump from a year ago. Despite the increase in inflation, job growth has remained strong as many employers are left with open positions.
It has been found that there are 1.7 open positions for every available worker. The economy has now gained roughly 263,000 nonfarm positions. Although it is unfortunate that many employers are unable to fill positions, this in turn has helped increase wages.
In terms of sectors, hospitality had the largest gain compared to other industries as they had an increase of 83,000 positions. Even with the increase, hospitality still has 1.1 million jobs less than February 2020.
The next biggest industry was healthcare which added 60,000 professionals. While many industries saw an increase, there were a few sectors that saw losses. For example, there was a drop of 25,000 government positions and 8,000 losses for transportation and warehousing.
Federal Reserve officials predict that the unemployment rate will increase to 4.4% in 2023. They are expecting that the increase in inflation will cause “some pain” on the economy. It is anticipated that the Fed will continue to raise rates by another 0.75 percentage point this month. Traders are also anticipating that the Fed will do a half-point uptick in December which will increase the federal funds rate to a range of 4.25%-4.5%.
Despite the Federal Reserve’s efforts, the labor market continues to remain resilient and strong even with the interest rate hikes. However, since inflationary pressures are not causing the market to slow down fast enough, it is unlikely that we are coming to the end of the Fed’s tightening cycle.
If you are looking for employment, it is still a great time to be on the hunt. It seems companies will still be on the hunt for talent.