Rapid slowdown in U.S. employment statistics and worsening unemployment rate also set back expectations for Fed rate hikes

[Washington Current Affairs] In the US employment statistics for September released on the 2nd, the growth in the number of non-agricultural workers, which is a clue to the future of the economy, unexpectedly slowed down sharply. Although the unemployment rate has worsened for the first time in seven months, the prevailing view is that the employment situation has maintained a ``stable trend'' (according to economists). The Federal Reserve Board (Fed) plans to focus on price indicators that will be announced in the future when deciding whether to raise interest rates further.

U.S. employment increased by 29,000 in September, sharply slowing down, unemployment rate worsening to 4.2%

The number of employed people in September increased by 29,000 from the previous month, which was much lower than the expected increase of 90,000. The unemployment rate was 4.2%, an increase of 0.1 point from the previous month. In addition to the weak employment data, a high-ranking official said that ``policy adjustments should be decided carefully'' (Fed. Fed Vice Chairman J.D. Jefferson), and expectations that the Fed would raise interest rates at its monetary policy meeting on the 27th and 28th of this month, following the previous meeting in September, have faded.

However, the rise in the unemployment rate appears to be due to an increase in the number of people willing to work, so it is hard to say that employment is deteriorating. The average pace of increase in the number of employed persons over the past three months has remained at approximately 50,000. ``The Fed's priorities have not slowed down enough to change from inflation (to employment),'' said a major financial institution.

The most recent inflation rate in August was 3.4%, much higher than the Fed's target of 2% due to soaring oil prices due to the U.S.-Iran conflict. Cleveland Federal Reserve Bank President Hammack, known as a ``hawk'' who emphasizes price stability, analyzed on the 2nd that the labor market is close to full employment. "The concern is really about inflation," he said.

In the interest rate futures market, the probability that the Federal Reserve would raise interest rates this month was at one point as high as 70% due to concerns about inflationary pressures, but has recently fallen to 20%. One reason for the large fluctuations in forecasts is that Chairman Warsh has maintained his policy of not giving advance indications of interest rate trends, increasing uncertainty about policy management. If price indicators showing the persistence of inflation appear one after another in the future, there is a possibility that the market's expectations for further interest rate hikes will become stronger again.