U.S. job growth slowed more than expected in October, a sign the labor market is finally softening in the face of higher interest rates, stubborn inflation and other economic uncertainties.
Employers added 150,000 jobs in October, the Labor Department said in its monthly payroll report released Friday, missing the 180,000 jobs forecast by Refinitiv economists.
The unemployment rate, meanwhile, unexpectedly ticked up to 3.9% — the highest level in nearly two years. The pickup in the jobless rate suggests that layoffs are on the rise; the survey of households shows that the number of workers laid off rose in October by 92,000 from the previous month.
WORKERS NOW DEMANDING NEARLY $80K TO START NEW JOB
The report also contained steep downward revisions to job growth at the end of the summer. Gains for August and September were revised down by a total of 101,000 jobs to a respective 165,000 and 297,000, the government said, suggesting that the labor market is weaker than it previously appeared.
“Winter cooling is hitting the labor market,” said Becky Frankiewicz, chief commercial officer of ManpowerGroup. “Employers and employees are hunkering down for cooler months with hiring solid yet stabilizing.”
The Federal Reserve has signaled it is closely watching the report for evidence the labor market is finally cooling after more than a year of interest rate hikes. Policymakers voted this week to leave their benchmark rate unchanged for a second straight time in order to assess the cumulative impact of previous increases.
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Many economists have suggested the Fed is done with its tightening campaign, although Chair Jerome Powell warned Wednesday that any “tightness in the labor market” could be reason for concern.
Traders reduced the odds of further rate increases in the coming months after the report pointed to a deceleration in hiring last month. Stock futures jumped, and bond yields fell Friday morning.
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PRIVATE SECTOR JOB GROWTH INCREASES LESS THAN EXPECTED IN OCTOBER: ADP
In another welcome sign for the Fed, average hourly earnings — a key measure of inflation — increased 0.2% for the month and remain up 4.1% from the same time one year ago. Both figures came in below estimates.
“The overall weakening in employment demand and wage growth supports our view that the Fed is done raising rates for this cycle,” said Kathy Bostjancic, Nationwide chief economist. “Moreover, it supports our forecast for a mild recession to unfold in the first half of 2024.”
Job gains were mostly broad-based last month, with the biggest gains in health care (58,000), government (51,000) and social assistance (19,000). Employment declined in manufacturing, largely reflecting the UAW strike against Ford, Stellantis and General Motors.
The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. However, Friday’s report suggests that cracks are appearing after last year’s blistering pace of growth.
“The October jobs report showed a clear softening in labor market conditions with markedly slower hiring, cooling wage growth, an uptick in the unemployment rate and a shorter workweek,” said Lydia Boussour, EY chief economist. “Looking ahead, we foresee softer labor market conditions with further hiring freezes and strategic resizing decisions along with some continued moderation in nominal wage growth.”
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