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September 2022 Vacancy Report:

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Job growth slightly missed expectations in September and the unemployment rate fell despite the Federal Reserve’s efforts to slow the economy, the Labor Department said on Friday.

Nonfarm payrolls rose 263,000 for the month, compared with the Dow Jones estimate of 275,000.

The unemployment rate was 3.5% against a forecast of 3.7%, as the employment rate fell to 62.3% and the workforce fell by 57,000. A broader measure that includes reluctant workers and those working part-time for economic reasons saw an even bigger drop, to 6.7% from 7%.

The payrolls number for September slowed from a gain of 315,000 in August and was the slowest monthly increase since April 2021.

“Depending on your view of the economy, optimism versus pessimism, this report has something for everyone,” said Liz Ann Saunders, chief investment strategist at Charles Schwab. “Obviously the market is not happy, but the market as a whole is not happy these days.”

Futures on the stock market moved below after liberation while government bond yields rose. Investors looked to the numbers to get a sense of how the Federal Reserve would respond to efforts to reduce inflation.

“It puts the nail in the coffin for another 75 [basis point rate increase] in November,” said Jeffrey Roach, chief economist at LPL Financial. The basis point is 0.01 percentage point.

In closely watched wage figures, average hourly earnings rose 0.3% on the month, in line with estimates, and 5% on a year-over-year basis, still well ahead of the previous reading.pandemic norm, but 0.1 percentage points below the forecast.

From a sector perspective, leisure and hospitality led growth with an increase of 83,000, an increase that still left the industry 1.1 million jobs below pre-pandemic levels in February 2020.

Health care added 60,000, professional and business services rose 46,000 and manufacturing added 22,000. Construction rose 19,000 and wholesale trade rose 11,000.

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A cut of 25,000 government jobs was the reason the report missed expectations. State and local hiring is highly seasonal, so the decline points to a report that was otherwise mostly in line with expectations and shows a resilient labor market.

Also on the negative side, financial activities and transportation and warehousing led to the loss of 8,000 jobs.

The report “really just shows that the consumer and corporate side have been very resilient despite the headwinds Russian-Ukrainian warrising interest rates and a slowdown in the housing market,” Roach said. “This could add to the story of a soft landing [for the economy] it seemed pretty elusive for a while.”

The report comes amid the Fed’s months-long effort to reduce inflation, which is nearing its highest annual rate in more than 40 years. The central bank has raised rates five times this year by 3 percentage points and is expected to continue raising them until at least the end of the year.

Despite the job gains, job growth remains relatively high as companies face a huge supply-demand gap, leaving roughly 1.7 job openings for every available worker. This, in turn, has helped boost wages, although growth in average hourly earnings has fallen well short of inflation, which was most recently at 8.3%.

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Fed officials, including Chairman Jerome Powell, said they expected the rate hike to cause “some pain” to the economy. Members of the Federal Open Market Committee said in September that they expect the unemployment rate to rise to 4.4% in 2023 and hold there before falling to 4% in the long run.

Many markets expect the Fed to continue its pace of rate hikes, increasing by another 0.75 percentage points in November. Traders assigned an 82% chance of a three-quarter point move following the jobs numbers and expect another half-point hike in December, which would take the federal funds rate to 4.25%-4.5%.

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