September's hotly anticipated jobs data ended up cooling markets on Friday. Stocks fell sharply as investors evaluated the report, which showed more jobs than expected were added to the US economy and indicated that more pain-inflicting interest rate hikes from the Federal Reserve lie ahead.
But a breakdown of the numbers shows that the Fed's plans to weaken the labor market to fight persistent inflation may already be working, just not for everybody.
White-collar office workers appear to be feeling the brunt of the Fed's actions: The financial and business sector saw a large decline in employment last month. Legal and advertising services also experienced drops. Service and construction workers, meanwhile, are still thriving.
What's happening: The US economy added 263,000 jobs in September, higher than analyst estimates of 250,000. The unemployment rate came in at 3.5%, down from 3.7% in August.
Leading the gain in jobs was the leisure and hospitality industry, which added 83,000 jobs in September — and employment in food services and drinking places made up 60,000 of those jobs alone. Manufacturing and construction also came in hot, adding 22,000 and 19,000 jobs, respectively.
The largest non-governmental losses in jobs came from the financial industry, which shed 8,000 between August and September. Large banks hire in cycles, extending offers to recent graduates in the early fall months. That makes this September's drop particularly significant.
Business support services — such as telemarketing, accounting and administrative and clerical jobs — are also bleeding jobs. The sector lost 12,000 in September. Meanwhile, legal services lost 5,000 jobs, and advertising services also dropped 5,000 jobs.
What it means: The Federal Reserve's hawkish policy appears to be cooling certain parts of the economy, but not others. Finance workers are likely beginning to worry as their industry depends on stock and lending markets which have been particularly hard hit by Fed actions.
Friday's numbers indicate that we're beginning to see that impact in the employment data. What remains to be seen is whether the Fed can cool the economy just by loosening employment in white-collar industries or if these losses will trickle down to other industries, hurting lower-income workers.
Coming up: Earnings season begins in earnest this week with big banks like JPMorgan, Citigroup, Morgan Stanley and BlackRock reporting. Investors will be watching closely for any guidance on hiring and layoff plans.
Two key inflation indicators, PPI and CPI, are also set to be released. Expect markets to react poorly if inflation comes in hot.
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