Yahoo Finance

Job growth slowed for a second month in September as a series of supersized interest rate hikes permeated the U.S. economy, but the softer nonfarm payroll gain is still unlikely to deter policymakers from aggressive monetary action to fight inflation that remains at a decades-high.

Here are highlights from the latest monthly jobs report released by the Labor Department on Friday, compared to consensus estimates from Bloomberg.

• Non-farm payrolls: +263,000 vs. +255,000 expected

• Unemployment rate: 3.5% vs. 3.7% expected

• Average hourly earnings, month-over-month: +0.3% vs. +0.3% expected

• Average hourly earnings, year-over-year: +5.0% vs. +5.0% expected

The cool-off in September employment data is a welcome sign for Fed officials trying to tamp down an extraordinarily tight labor market that has placed upward pressure on wages and contributed to soaring prices. However, the print remains substantially higher than the 150,000-200,000 average that was typical before the pandemic, leaving room for the U.S. central bank to proceed with hefty rate increases.

“Today’s job number is a hawkish reading, with almost all the elements of the report moving in the wrong direction for the Fed," Principal Global Investors Chief Global Strategist Seema Shah said in a note.

Stocks plunged and Treasury yields spiked on Friday as investors digested the data after hoping a larger decline in the headline number would encourage sooner policy shift by the Fed.

"Payrolls were broadly in line with expectations but, importantly in this good news is bad news: markets were hoping for a downside surprise today," Shah added. "Instead, the number only confirms that the Fed needs to hike rates by a fourth consecutive 0.75% in November.”

Despite the drop off in jobs added during the month, the unemployment rate fell to 3.5%, while economists had expected the figure to hold at 3.7%. The labor force participation rate in September ticked down slightly to 62.3% from 62.4% the prior month.

Average hourly earnings, a closely watched part of the report, rose 0.3% over the month, on par with both the prior reading and Wall Street expectations. On an annual basis, wages slipped slightly to 5.0% from 5.2% in August, also in line with estimates.

“To the extent that there are any implications for the Fed, the data brings us back to where we were before last month,” Jefferies economists Thomas Simons and Aneta Markowska said in commentary. “There is not a lot of capacity for the labor force to grow, and thus, strong wage pressure is going to continue to be an issue."