WASHINGTON (AP) — The nation’s employers added 336,000 jobs in September, an unexpectedly robust gain and the largest monthly rise since January, evidence that many companies remain confident enough to keep hiring despite high interest rates and a hazy outlook for the economy.

Last month’s job growth jumped from a 227,000 increase in August, which was revised sharply higher. July’s gain was also healthier than had been initially estimated. The economy has now added an average of 266,000 jobs a month for the past three months, a streak that could make it likelier that the Federal Reserve will raise its key rate again before year’s end as it continues its drive to tame inflation.

Friday’s report from the Labor Department also showed that the unemployment rate was unchanged at 3.8%, not far above a half-century low.

The job market has defied an array of threats this year, notably high inflation and a rapid series of Fed interest rate hikes that were intended to conquer it. Though the Fed’s hikes have made loans much costlier, steady job growth has helped fuel consumer spending and kept the economy growing, defying long-standing predictions of a forthcoming recession.

Though the strong September job gain could lead the Fed to consider additional rate hikes, some economists pointed to signs that might suggest otherwise. They noted that wage growth slowed in September, with average hourly pay rising 4.2% from a year earlier.

That was still healthy and slightly above inflation but was the slowest pace in more than two years. The Fed has been concerned that if pay rises too fast, companies will raise prices to cover their higher labor costs, thereby fueling inflation. September’s slower pace of wage growth might help allay that concern.

In addition, long-term interest rates have spiked in the past two months, making loans more expensive across the economy and potentially serving as a brake on economic growth and inflation. Other threats to the economy have also emerged in recent weeks, including rising energy prices, the resumption of student loan payments, widening labor strikes and the ongoing threat of a government shutdown. Collectively, some economists said, those challenges might persuade the Fed to leave rates unchanged through year’s end.

“It’s a pretty solid report and perhaps it makes the Fed a little bit more nervous just given the overall strength of the jobs market,” said Sarah House, senior economist at Wells Fargo. But the jump in interest rates “is doing some of the Fed’s work for it, and that makes another hike less compelling.”

Most large industries added jobs last month, from health care, which gained 66,000, to manufacturing, which added 17,000, to retailers, which added nearly 20,000. Professional services, a category that includes engineers and architects, gained 21,000. Government at all levels added 73,000 jobs, reflecting the healthy budgets of most state and local governments.

The Fed’s inflation fighters have been scrutinizing every scrap of data to determine whether to raise their key rate once more this year. On Thursday, Mary Daly, president of the Federal Reserve Bank of San Francisco, said that the Fed could stop raising rates if the job market kept slowing and inflation kept easing. Last week, a price gauge closely tracked by the Fed showed that measures of underlying inflation slowed in the latest sign that overall price pressures were still moderating.

“If we continue to see a cooling labor market and inflation heading back to our target, we can hold interest rates steady and let the effects of policy continue to work,” Daly said in remarks to the Economic Club of New York.

Job growth has remained resilient for most of the past 2 1/2 years even after high inflation flared and the Fed jacked up interest rates at the fastest pace in four decades. The Fed’s benchmark rate stands at a 22-year high of roughly 5.4% after 11 hikes beginning in March 2022. The central bank’s rate increases have led to much higher borrowing costs for consumers and businesses across the economy.

On the one hand, Fed officials, including Chair Jerome Powell, have stressed that inflation remains too far above their 2% target and that another rate hike might be needed to slow it to that level. At the same time, several Fed policymakers have underscored that they want to be careful not to raise borrowing rates so much as to trigger a deep recession.

After a period in the spring when traders seemed to expect the Fed to reverse course and cut interest rates soon, the financial markets now recognize that the central bank will keep its key rate elevated well into 2024. That’s one reason why the yield on the 10-year Treasury note has surged since July, reaching a 16-year high this week before slipping to 4.7% Thursday.

The 10-year yield is a benchmark rate for other borrowing costs, including mortgages, auto loans and business borrowing. The average rate on a fixed 30-year mortgage jumped to nearly 7.5% this week, the highest level in 23 years. The higher yield has, in turn, punished stocks: The S&P 500 stock index has tumbled 7.2% since late July.

Goldman Sachs has estimated that the economy’s growth in the current October-December quarter could slow to an annual rate as low as a 0.7%, sharply below a roughly 3.5% pace in the July-September quarter.

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AP News | Paul Wiseman

WASHINGTON (AP) — U.S. employers added an astonishing 528,000 jobs last month despite flashing warning signs of an economic downturn, easing fears of a recession and handing President Joe Biden some good news heading into the midterm elections.

Unemployment dropped another notch, from 3.6% to 3.5%, matching the more than 50-year low reached just before the pandemic took hold.

The economy has now recovered all 22 million jobs lost in March and April 2020 when COVID-19 slammed the U.S.

The red-hot numbers reported Friday by the Labor Department are certain to intensify the debate over whether the U.S. is in a recession.

“Recession — what recession?” wrote Brian Coulton, chief economist at Fitch Ratings. “The U.S. economy is creating new jobs at an annual rate of 6 million — that’s three times faster than what we normally see historically in a good year.”

Economists had expected only 250,000 new jobs last month, in a drop-off from June’s revised 398,000. Instead, July proved to be the best month since February.

The strong figures are welcome news for the Biden administration and the Democrats at a time when many voters are worried about the economy.

Inflation is raging at its highest level in more than 40 years, and the economy has contracted for two quarters in a row, which is the common — but informal — definition of a recession and does not take into account a host of other factors economists consider, such as the job picture.

At the White House, Biden credited the job growth to his policies, even as he acknowledged the pain being inflicted by inflation. He emphasized the addition of 642,000 manufacturing jobs on his watch.

“Instead of workers begging employers for work, we’re seeing employers have to compete for American workers,” the president said.

Biden has boosted job growth through his $1.9 trillion coronavirus relief package and $1 trillion bipartisan infrastructure law last year. Republican lawmakers and some leading economists, however, say the administration’s spending has contributed to high inflation.

The president has received some other encouraging economic news in recent weeks, as gasoline prices have steadily fallen after averaging slightly more than $5 a gallon in June.

On Wall Street, stocks closed mostly lower Friday. The good news about job creation was mostly offset by worries that the Federal Reserve will have to keep aggressively raising interest rates to cool the economy and tamp down inflation.

“The strength of the labor market in the face of … rate-tightening from the Fed already this year clearly shows that the Fed has more work to do,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, today’s report should put the notion of a near-term recession on the back burner for now.″

The Labor Department also reported that hourly earnings posted a healthy 0.5% gain last month and are up 5.2% over the past year. But that is not enough to keep up with inflation, and many Americans are having to scrimp to pay for groceries, gasoline, even school supplies.

Job growth was especially strong last month in the health care industry and at hotels and restaurants.

The number of Americans saying they had jobs rose by 179,000, while the number saying they were unemployed fell by 242,000. But 61,000 Americans dropped out of the labor force in July, trimming the share of those working or looking for work to 62.1% from 62.2% in June.

New Yorker Karen Smalls, 46, started looking for work three weeks ago as a member of the support staff for social workers.

“I didn’t realize how good the job market is right now,” she said after finishing her fifth interview this week. “You look at the news and see all these bad reports … but the job market is amazing right now.’’

A single mother, she is weighing several offers, looking for one that is close to home and pays enough to let her take care of her two children.

Two years ago, the pandemic brought economic life to a near standstill as companies shut down and millions of people stayed home or were thrown out of work. The U.S. plunged into a deep, two-month recession.

But massive government aid — and the Fed’s decision to slash interest rates and pour money into financial markets — fueled a surprisingly quick recovery. Caught off guard by the strength of the rebound, factories, shops, ports and freight yards were overwhelmed with orders and scrambled to bring back the workers they furloughed when COVID-19 hit.

The result has been shortages of employees and supplies, delayed shipments and high inflation. In June, consumer prices were up 9.1% from a year earlier, the biggest increase since 1981.

The Fed has raised its benchmark short-term interest rate four times this year in a bid to tame inflation, with more increases ahead.

Labor Secretary Marty Walsh conceded that businesses and consumers are worried about inflation but added: “Companies are still growing, and they’re looking for employees. And that’s a good sign.”

In a report filled with mostly good news, the Labor Department did note that 3.9 million people were working part time for economic reasons in July, up by 303,000 from June. Department economists said that reflected an increase in the number of people whose hours were cut because of slack business.

Some employers are also reporting signs of slack in the job market.

Aaron Sanandres, CEO and co-founder Untuckit, an online clothing company with nearly 90 stores, noticed that in the past few weeks that it has been a bit easier filling jobs at the corporate headquarters in New York and part-time roles at the stores.

“We have had a plethora of candidates,” Sanandres said. He also said the labor market has been loosening up for engineers, probably as a result of some layoffs at technology companies.

Simona Mocuta, chief economist at State Street Global Advisors, was among those stunned by the strong hiring numbers when other indicators show an economy losing momentum.

Mocuta said it is possible that hiring rose so sharply last month because job candidates, seeing signs of an impending slowdown, are now more willing to accept jobs they would have balked at earlier in the year. Conditions may now be “shifting in employers’ favor,” she said.

Whatever the reason for it, the employment data released Friday shows an astonishingly strong and resilient job market.

”Underestimate the U.S. labor market at your own peril,″ said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Yes, output growth might be slowing and the economic outlook has some clouds on the horizon. But employers are still champing at the bit to hire more workers. That demand may fade, but it’s still red-hot right now.″

Josh Boak in Washington, Anne D’Innocenzio in New York and Courtney Bonnell in London contributed to this story.

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