Federal Reserve officials have been watching the job market closely, wary that it might be cracking under the pressure of high interest rates. The September employment report does a lot to alleviate those concerns.

Companies hired at a rapid clip, the unemployment rate dipped and wage growth came in strong last month — a sign that the economy is holding up in the face of high borrowing costs.

The report reversed recent signs of a labor market slowdown. In doing so, it probably took away the argument for a big rate cut at the Fed’s next meeting, in early November.

But it also neutralized feelings among market observers that the Fed had acted too slowly, based on poor jobs numbers in preceding months. This is because the Labor Department also revised up its estimate of job growth in July and August by a combined 72,000.

Fed policymakers lowered interest rates by half a point in September, an unusually large rate cut and their first in more than four years. Officials were reacting to slowing inflation and a recent cooling in the labor market as evidenced by July’s initially poor showing.

Looking forward

Now Fed Chair Jerome Powell has been clear that future rate cuts are likely to be more measured if the economy performs as expected. The Fed’s economic projections in September showed that officials expect to lower borrowing costs by another half a point before the end of the year, implying that they would make a quarter-point cut at each of their remaining two meetings.

Officials had forecast that the job market would continue to slow slightly — with unemployment ticking up to 4.4% — before leveling off.

Friday’s jobs data suggested that instead of gradually slowing, the job market may in fact be stabilizing already. Unemployment ticked down to 4.1% last month, and wage growth picked up to 4%, faster than the 3.8% economists had expected.

While Fed officials will receive one more jobs report before their meeting Nov. 6-7, that report will come just days before the gathering, during the quiet period that Fed officials observe before their policy decisions. That means that the September employment report is the final one that central bankers will be able to assess and widely talk about before their decision.

Policymakers will also be watching other incoming data, including inflation numbers set for release next week, weekly jobless claims and anecdotal information about how the economy is holding up.

Delicate balance

The Fed is trying to strike a delicate balance. High interest rates slow the economy by making it more expensive to buy a house or expand a business on borrowed money. But while Fed officials wanted to cool conditions enough to wrestle rapid inflation under control, they do not want to cool them so much that they cause a painful economic crash.

That is why policymakers are now lowering rates — but proceeding carefully.

“Our design overall is to achieve disinflation down to 2% without the kind of painful increase in unemployment that has often come with disinflation processes,” Powell said this week. “We haven’t completed that task.”

This report contains information from the Associated Press.