The Federal Reserve is keeping a close watch on the jobs market, while investors will also have been awaiting the latest data for any signs indicating the economy is heading into a recession.
Last week, the Fed’s chairman, Jerome Powell, warned that interest rates need to continue rising to stop inflation from becoming a permanent aspect of the US economy.
Inflation – the rate at which prices are rising – in the US is at a 40-year high.
Higher borrowing costs aim to reduce spending and curb inflation, but they can also slow economic activity. The Fed is hoping the labour market remains strong enough to allow it to raise rates without triggering a recession.
The US economy has shrunk for two quarters in a row. In many countries, that milestone would already be considered an economic recession.
Yet that is not the case in the US, which uses additional data to make that call.
Janet Mui, head of market analysis at wealth manager Brewin Dolphin, said the rise in the US unemployment rate was “an uncomfortable read”.
“However, it remains at a near historic low and was driven by an increase in labour force participation – meaning more people were in the labour force working or looking for work – which is good news for policymakers,” she added.
Ms Mui said that while the job creation figure was higher than economists’ expectations, wage growth came in slightly lower than predictions.
Friday’s report showed average hourly pay up 5.2% compared with August 2021.
“Overall, this is a good set of data and underpins a resilient and tight job market. Today’s report does little to change the Fed’s hawkish resolve but is modestly supportive of the peak US inflation narrative,” Ms Mui continued.
