Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.
Employers added 263,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, a decline from 315,000 in August. The number was the lowest since April 2021 but still solid by prepandemic standards. The unemployment rate fell to 3.5 percent, equaling a five-decade low.
“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.
Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.
But it also increases the prospect that the effort to subdue price increases will be more extended. For investors, that came as bad news, since higher interest rates raise costs for companies and weigh on stock prices.
The S&P 500 recorded its worst one-day performance since mid-September, falling 2.8 percent and eroding gains from earlier in the week.
Fed officials have signaled in speeches this week that they remain resolute in trying to wrestle inflation lower, and that they are waiting for clear evidence that the economy is headed back toward price stability before they pull back.
Wage growth has subsided somewhat, at least compared with the trend a year ago. Average hourly earnings climbed 5 percent from a year earlier, roughly matching economists’ expectations but slowing down slightly from the prior annual reading.
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