Recession? Inflation? No one told the labor market, which is still steadily adding jobs.

Employment increased by 263,000 in September, while the unemployment rate fell to 3.5 percent from 3.7 percent in August, according to data released by the Bureau of Labor Statistics. Economists surveyed by Bloomberg had expected employers to add 265,000 new jobs while the unemployment rate would stay steady at 3.7 percent.

The BLS also revised past figures from July and August, finding that 11,000 more jobs were added in July while August numbers were the same.

The latest employment data confirm that the labor market continues to steadily add jobs despite the Federal Reserve’s efforts to slow down the economy by dramatically raising interest rates since March of this year.

The picture for the labor market, however, is not entirely clear.

There were already some signs of disruption for workers earlier this week, when a separate Bureau of Labor Statistics report on labor turnover showed the number of job openings dropping by over 1 million in August — the biggest such drop since the spring of 2020. The number of layoffs also picked up — the 1.5 million in August is the highest since March 2021.

Stock futures fell slightly after the numbers were released, indicating that investors expected the jobs report to encourage the Federal Reserve to continue sizable interest rate hikes, tightening up monetary policy in an effort to cool off the economy.

Grid Politics Editor Leah Askarinam asked Domestic Economics Reporter Matthew Zeitlin about the September jobs report. This interview has been edited for length and clarity.

Grid: What sticks out to you about this jobs report? Where is growth the strongest, and where is it the weakest?

Matthew Zeitlin: The most notable thing about the report is its overall strength. The Federal Reserve has been telling anyone who asks that it wants less economic activity, a looser labor market and slower wage growth. And while the job creation numbers have fallen off the highs of earlier this year, employers still have enough confidence in the economy to continue to hire.

Some of the strongest job growth was in sectors hit hard by the pandemic. Leisure and hospitality employers added 83,000 net new jobs, with 60,000 of those coming from bars and restaurants. Job losses came more from white-collar industries like law and advertising.

G: We’ve been hearing so much about economic disruptions — stocks are down, the housing market is declining, there are economic crises overseas. Is any of this showing up in the jobs number?

MZ: It’s hard to tell. At best, you can say that without the Fed slamming the brakes on the economy, job growth would be even higher than it is now. One area where the Fed’s efforts to slow down the labor market might be showing up is in average hourly earnings, which rose by 0.3 percent, which translates out to 10 cents, whereas earlier this year and late last year, the monthly earnings increase was closer to 0.5 percent or 15 cents.

G: What about the potential of a recession? The economy shrunk in the first half of the year even as job growth was steady. Are we seeing any signs of that slowdown in these numbers?

MZ: If you’re looking for an economic slowdown, look at the stock market, which is down about a fifth this year. The worst you can say about employment is that it’s growing slower than it was late last year or earlier this year. According to the Federal Reserve Bank of Atlanta’s estimate of current economic growth, the economy is expanding again, yet job growth is slower than it was when gross domestic product was shrinking.

G: You recently wrote about the relationship between unemployment and inflation as a type of balancing act. Which way are the scales tipping, based on this report and the latest inflation numbers?

MZ: The Federal Reserve has been trying to pull the number of job openings per unemployed worker down from about two. The theory is that by reducing the number of job openings, the Fed can reduce the growth in wages and thus bring inflation closer to 2 percent without a large increase in unemployment.

Inflation is still high, and job growth is still quite steady with wages going up. “This is not the inflation outcome I am looking for to support a slower pace of rate hikes or a lower terminal policy rate than projected,” Federal Reserve governor Christopher Waller said in a speech on Thursday. “More needs to be done to bring inflation down meaningfully and persistently.”

Nothing in today’s job report will likely change that calculation.

Thanks to Lillian Barkley for copy editing this article.