New York
CNN Business
—
The white-hot U.S. job market is showing signs of slowing, with the Labor Department reporting a slower hiring pace and higher unemployment on Friday.
While the closely watched October jobs report was strong by historical standards, it suggests that a series of rate hikes by the Federal Reserve aimed at cooling the economy did not, until present, had only a limited impact on employers’ desire to hire more workers.
The report shows that employers added 261,000 jobs in October and the unemployment rate fell to 3.7% from 3.5% in September.
That’s a lower monthly job gain than September’s revised number of 315,000, though it was higher than the 200,000 forecast by economists polled by Refinitiv.
October marks the smallest monthly jobs gain for the U.S. economy since December 2020. But it’s also a solid gain by historical standards. The economy created an average of 183,000 jobs per month in the decade before the pandemic.
“Today’s stronger-than-expected report illustrates the difficult task ahead of the Fed as it battles a resilient labor market and persistent inflation,” said Mike Loewengart, head of portfolio construction. models for Morgan Stanley Global Investment Office. “While the number may be disappointing for investors hoping for a dovish Fed sooner rather than later, keep in mind this is the lowest reading in nearly two years.”
Economists had expected the unemployment rate to rise less, to just 3.6%. The unemployment rate is calculated using a separate household survey rather than the employer survey used to count workers at work.
The higher-than-expected unemployment rate is also still low by historical standards – September’s reading of 3.5% matched a half-century low.
Federal Reserve Chairman Jerome Powell has warned that the economy may have to cut jobs as part of the central bank’s battle to slow the pace of economic growth to combat rising prices. Continued strength in the labor market could leave the door open for the Fed to continue raising rates in future meetings.
Several economists said Friday they believe the Fed could slow the pace of rate hikes to half a percentage point, rather than the three-quarter-point increases it has approved in recent meetings.
“The bottom line here is that the labor market is softening, but hasn’t yet reached the point where the data is screaming for the Fed to stop tightening,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics. “But if these trends continue, as we expect, the markets will start pushing the Fed – and in particular Chairman Powell – to rethink the idea of continuing the hikes next year.”
The jobs report was hailed as good news by Labor Secretary Marty Walsh.
“Obviously 261,000 jobs is great,” he told CNN in an interview Friday morning after the jobs report. However, he noted that while total employment is now higher than it was before the pandemic, there are still some sectors, such as leisure and hospitality and public schools, where employment is not not yet back to pre-pandemic levels.
But he acknowledged that even with a strong job market, high prices, not jobs, are what most Americans are concerned about.
“No matter how many jobs I can get in front of this camera and tell you how we added and how awesome they are, people still feel the struggle at the kitchen table,” he said. . The Biden administration is trying to address rising prices with its Cut Inflation Act, he added.
In addition to employment totals, another key metric the Fed is focusing on is wage growth, as higher wages can create inflationary pressures by putting more money in the hands of consumers and spurring growth. demand for goods and services.
October’s jobs report showed a slowdown in wage gains, with the average weekly wage paid by businesses rising just 3.8% from September’s 4.1% annual gain, and much a far cry from the gains of 5% or more seen earlier this year and for many months. of 2021.
Even when wage growth was 5%, this did not keep pace with price increases paid by consumers, which averaged 8.2% in the most recent consumer price index. . The slower pace of wage increases in this report indicates that it will be even more difficult for American consumers to pay the higher prices.
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