US job growth rose again in September. Could it mean more interest rate hikes?

Total nonfarm employment in the U.S. returned to its pre-pandemic high of 152.5 million in August and continued to grow from there in September. According to the latest jobs report, the U.S. economy added 263,000 jobs last month, bringing the seasonally adjusted total to 153.0 million. Meanwhile wages also continued their upward trend, growing 5 percent in September across the economy – likely too much for the Fed to abandon its hawkish stance in the face of inflation.

While last week’s two-day stock market rally to start the fourth quarter was at least partly fueled by signs that the U.S. labor market was starting to cool, the week ended on a downbeat note after Friday’s jobs report showed robust job growth and the unemployment rate dropping back to a 50-year low of 3.5 percent.

It’s a weird situation created by the inflation crisis: while normally picking up on good news, Wall Street is now desperately hoping for signs of a slowing economy/labor market, because anything signaling a slowdown increases the chances of the Fed pivoting to less aggressive rate hikes going forward.

As its stands ahead of this week’s CPI reading, another 75-point rate hike looks all but certain at the next FOMC meeting in early November. The CME FedWatch Tool puts the likelihood of another such hike at 80 percent, up from just over 50 percent at the end of September.