STEVE INSKEEP, HOST:
American consumers are heading toward the holiday season with their budgets not quite adding up.
MICHEL MARTIN, HOST:
Inflation is up, meaning people have to pay more for things they need or want to buy. But wages have grown less than inflation, meaning that many people who pay more also have to borrow more. And interest rates are up, meaning the borrowing costs more.
INSKEEP: Those are the trends as we receive the government's latest update on the job market, which was not very impressive. NPR's Scott Horsley brings it all together for us. Scott, good morning. Welcome back.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: OK. The job market didn't look so great. Hiring slowed. What are the numbers?
HORSLEY: Yeah. U.S. employers added just 29,000 jobs last month. That's weaker than forecasters were expecting. And job gains for both July and August were revised down by a total of 60,000. The updated figures now show a net loss of jobs during the month of July. We're still not seeing a massive number of layoffs across the economy, but most industries just aren't doing a lot of hiring either. Sarah House, who's a senior economist at Wells Fargo, says the job market's kind of inching along in low gear.
SARAH HOUSE: You're seeing some modest hiring. The good news is you're not seeing a lot of layoffs. But it's really hard if you are one of those workers who loses their job or you're new to the labor force or maybe coming back. There's just not a lot of turnover, so it makes it harder to get your foot in the door right now.
HORSLEY: One way to measure the strength of the job market is look at what's happening with wages. And in September, average wages were up just 3% from a year ago. That's a slowdown from the previous month. And, you know, in recent months, wage gains have not been keeping pace with rising prices, so the typical worker is losing some buying power month after month.
INSKEEP: OK. So what is the deal with inflation, then?
HORSLEY: Yeah. It's still high, although not quite as high as it had been. This week, the Commerce Department released its inflation scorecard for August. That's the one that the Federal Reserve watches most closely. And it showed prices in August were up 3.4% from a year ago. Course, rising gas prices are a big part of that. If you strip out energy and food, inflation was a more modest 3%, but that's still well above the target that the Central Bank has. A couple of weeks ago, the Fed raised its benchmark interest rate in an effort to tamp down inflation. Rebecca Venter, who monitors interest rates at Vanguard, says investors are now wondering how much higher borrowing costs are likely to go.
REBECCA VENTER: The Fed has come on pretty strong, reaffirming its commitment to bring inflation back to its 2% target. Now the question is - if growth is strong, if inflation's pretty sticky, where do rates need to go for that goal to actually be met?
HORSLEY: Of course, the Fed sets short-term interest rates. Long-term rates are set by the bond market, and they've been going up at a pretty rapid clip. The yield on 10-year Treasuries is up around 5.25% right now. That's pushing up borrowing costs for everybody else. The average rate on a 30-year mortgage this week, for example, was just under 7.25%.
INSKEEP: Wow. And that's going to keep a lot of people stuck in homes they might otherwise consider selling. What is pushing borrowing costs up so much?
HORSLEY: Yeah. It's a variety of factors. Part of it is that stubborn inflation, which makes lenders demand a bigger return. Lenders are also concerned about the size of the federal debt. It's ballooned to $40 trillion, double what it was nine years ago. And there's more competition for credit now because big tech companies are borrowing a ton of money to bankroll their artificial intelligence boom. Finally, you've also got consumers who are stretched thin. Mike Reid is head of U.S. economics at RBC Capital Markets. He notes that personal spending jumped almost a full percentage point last month, but personal income rose much more slowly.
MIKE REID: When you become reliant on credit to fuel your spending, there's a - an increasing risk that the Fed hikes are going to start to bite sooner rather than later.
HORSLEY: Now, so far, consumer spending has held up pretty well. But as we've talked about this morning, the job market is not generating enough wage growth to keep up with these rising prices. That means some people are having to borrow money to narrow that gap, and the cost of borrowing money is going up and up and up.
INSKEEP: OK. NPR's Scott Horsley, thanks so much for your insights.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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