The Federal Reserve’s tactic of attacking ongoing record inflation with aggressive interest rate hikes looks like it may finally be cooling off the red-hot U.S. labor market.

The latest Labor Department employment report released Friday shows U.S. nonfarm jobs rose by 263,000 in September, a solid number but one that reflects some easing after July hiring north of 500,000 and an August figure of 315,000 new positions.

U.S. unemployment also declined for the month, slipping from 3.7% in August to 3.5% for September, a rate matching 50-year lows.

While overall hiring was down in September, U.S. wage growth remains strong with workers now bringing home an average $32.46 per hour, up 10 cents per hour over last month and 5% over the same time last year.

Will the new jobs data slow down the Fed’s interest rate hikes?

As was widely expected, the Federal Reserve late last month announced a .75% hike to its benchmark interest rate, marking the third increase of that size since June and fifth overall rate bump this year.

The frequency and size of the rate increases are the fastest in decades and part of the Fed’s aggressive strategy to quell persistent, record-high U.S. inflation. While the tactic is already showing signs of pushing up the cost of consumer debt, an outcome the Fed favors in its attempts to reduce overall consumer demand, some economists worry the approach will push the U.S. economy into recessionary conditions.

Fed officials also forecast that they will boost their benchmark rate to roughly 4.4% by year’s end from its current 3% to 3.25% range, a full percentage point higher than they had forecast in June. And they expect to raise the rate further next year to about 4.6%. That would be the highest level since 2007.

While the September jobs data is a positive reflection that the Fed’s strategy is working, the monetary body would likely need to see more sustained evidence that hiring and pay gains are slowing before it would moderate its interest rate hikes as it fights inflation, according to The Associated Press.

A “School bus drivers needed” sign is posted in Cottonwood Heights on Friday, Oct. 7, 2022. The latest jobs report from the Labor Department finds U.S. businesses added 263,000 employees in September. | Jeffrey D. Allred, Deseret News

In September, hourly wages rose 5% from a year earlier — the slowest year-over-year pace since December but still hotter than the Fed would want, per AP. The proportion of Americans who either have a job or are looking for one slipped slightly, a disappointment for those hoping that more people would enter the labor force and help ease worker shortages and upward pressure on wages.

Inflation is still beating up U.S. consumers

The latest report from the U.S. Labor Department found prices of U.S. consumer goods and services dropped for the second month in a row, but overall costs were up 8.3% in August over the same time last year.

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Mountain West states, including Utah, saw the highest regional inflation in the country in August, coming in at 9.6%

Shelter, food and medical care all saw continued price increases in August. While overall gas prices dropped 10.6% last month, electricity and natural gas prices rose.

The food index, which captures price changes in both groceries and food purchased away from home, was up 11.4% in August over the same time last year, the biggest year-over-year increase since 1979, according to the Labor Department. August grocery prices were up 13.5% over August 2021.

While gas came down from July to August, prices were still up over 25% from a year ago.

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