top of page

Unemployment Rate Drops

Overview: Over the past week, global central banks showed little inclination to slow their aggressive pace of tightening monetary policy to fight inflation. As a result, mortgage rates climbed to their highest levels in over 15 years.


The key monthly Employment Report was released on Friday, and while most of the numbers were in line with expectations, there was one notable exception. The unemployment rate dropped to 3.5%, well below the consensus forecast of 3.7%, and the lowest level in decades. The decline was mostly due to people leaving the labor force, which is the opposite of what Federal Reserve officials would like to see. Officials are hoping that more workers will begin seeking jobs, making the labor market more balanced and bringing down wage inflation.

As for the other major components of the report, the economy gained 263,000 jobs in August, fewer than in recent months, but still strong by historical standards. The best performing sectors were leisure, hospitality, and health care, while government hiring fell. Average hourly earnings, an indicator of wage growth, were 5% higher than a year ago, down from an annual rate of 5.2% last month, but still far above the levels that Fed officials are hoping to see.

The minutes from the September 21 Fed meeting released on Wednesday contained no surprises and continued to emphasize the need for aggressive monetary policy tightening to bring down inflation. According to the minutes, inflation remained “unacceptably high” and well above the goal of 2%. Officials judged that the risks of doing too little outweighed the risks of tightening too much. They also noted that once the federal funds rate reached a “sufficiently restrictive level,” it would be appropriate to slow the pace of rate hikes and assess their impact on the economy.


Unemployment Rate %


Week Ahead

October 13 — Consumer Price Index (CPI)

October 14 — Retail Sales report

October 19New Residential Construction report (also known as Housing Starts)


bottom of page