For several months now, the US labor market has been on a cooling trajectory, and Friday’s jobs report made that even more apparent.
The US?economy?added 150,000 jobs last month, falling below expectations but still notching a solid month of employment growth, according to Bureau of Labor Statistics data released Friday.
October’s job growth came in below September’s stronger-than expected but downwardly revised total of 297,000 jobs.
“After the hot September, air conditioning has been turned on in October,” said Sung Won Sohn, chief economist of SS Economics and a professor of finance and economics at Loyola Marymount University.
The unemployment rate ticked higher to 3.9%, its highest level since January 2022.
Economists were expecting net job gains of 180,000 for the month and for the unemployment rate to hold steady at 3.8%, according to Refinitiv.
Last month’s job gains are the lowest since June, but there is a caveat: The October total reflects a 35,000-job decline in the manufacturing sector, specifically 33,200 jobs lost in the motor vehicles and parts industry. Those declines were largely attributed to strike activity.
The United Auto Workers union went on strike in mid-September against Ford, General Motors and Stellantis. At the end of October, the UAW reached tentative agreements with the Big Three automakers to end the labor strikes.
What this means for the Fed
The resiliency of the labor market has helped to keep consumer spending strong and the?economy?churning, but Federal Reserve officials are hoping for more of a slowdown in order to help rein in inflation.
“The October jobs report provides plenty of evidence that labor market conditions are softening and will allow the Fed to keep policy on hold as it monitors its progress toward returning inflation to 2%,” Nancy Vanden Houten, lead US economist for Oxford Economics, wrote in a note Friday.
Fed Chair Jerome Powell said Wednesday in a news conference that the labor market has been moving into “better balance,” but that it’s likely there still needs to be slower growth on the jobs front to fully achieve price stability.
Job growth has slowed tremendously from its breakneck pace in 2021 and 2022, when monthly gains averaged 605,000 and nearly 400,000, respectively. Including the estimated 150,000 jobs added last month and the downward revisions to August and September that totaled 101,000 jobs, the United States is averaging 239,000 jobs gained per month so far this year.
Fed officials are closely watching wage growth. In October, average hourly earnings ticked up by 0.2%, a slightly slower pace than the month before. On an annual basis, that measurement of pay growth is up 4.1%, the slowest growth seen since the middle of 2021.
Where the jobs were — and weren’t
Because of the timing of the striking actions and how the BLS tracks such activity, October is the first jobs report that reflects the massive strike.
In October, the BLS tabulated that there were 48,100 workers on strike. That’s the highest monthly since February 2004, when 72,000 Southern California grocery workers went on strike.
“With the strike now settled, employment in the industry should bounce back in November,” said Gus Faucher, chief economist with PNC Financial Services.
Aside from the significant — but likely temporary — losses registered in manufacturing, many industries recorded job gains last month, albeit at a more moderate pace.
The health care and social assistance industry accounted for nearly half of the month’s gains by adding 77,200 jobs last month. Government, led by local government and school, added 51,000 jobs.
Leisure and hospitality, which has been on a tear of hiring as of late, added a relatively muted 19,000 positions in October, versus a gain of nearly 80,000 jobs the month before, according to BLS data, which is adjusted for seasonal factors.
Unemployment edges higher
The monthly jobs report is composed of two surveys: One that surveys businesses about employment, hours and earnings; and the other that surveys households about their status in the labor force.
If there were a point of concern in Friday’s report, it’s coming from the latter survey, said Dante DeAntonio, senior director at Moody’s Analytics.
“The?unemployment?rate?edged higher to 3.9%, which itself is not concerning given our expectation for ongoing softening,” he wrote in commentary issued Friday. “However, the reason for the uptick is more problematic:?labor?force?participation backtracked for the first time since April, and employment as reported by the household survey swung significantly negative.”
Layoff activity has moderated in recent months; however, the latest jobless claims data that was released Thursday showed a steady rise in continuing claims, which are those filed by people who have received unemployment benefits for more than one week.
Such an increase potentially signals that laid-off workers are having more difficulty finding new jobs.
In Friday’s jobs report, the share of unemployed workers who have been out of a job for 15 weeks or more increased to 36.5% from 35.8%.
“The clearest path toward a soft landing in the?labor?market is for growth in?labor?supply to hold steady as job gains slow, allowing the?unemployment?rate?to ease slightly higher,” DeAntonio wrote.
A ‘solid and, yet, cooling’ trend
A monthly payroll gain of 150,000 jobs is absolutely cooler in the context of the past three years; but historically, it’s nothing to balk at.
“It’s still a robust market,” Ger Doyle, a senior vice president with ManpowerGroup, told CNN. “Overall, it’s stabilization coming back into the market. So it’s solid and, yet, cooling.”
It also remains well above the neutral rate of 70,000 to 100,000 jobs needed monthly to keep up with population growth.
In the decade before the pandemic — a period that, coincidentally, included the longest-ever stretch of labor market expansion — job growth averaged 183,000 per month.
October’s payroll gains bring this current streak to 34 months, which is the fifth-longest of job growth on record, BLS data shows.
And considering that there are about 1.5 open jobs for every unemployed person, there’s still plenty of room for this more sustainable growth to continue, Amy Glaser, senior vice president at staffing firm Adecco, told CNN.
“So we’ve seen, over the last couple of years, massive wage hikes and employees jumping from one employer to another for very large wage increases,” she said. “We’re starting to see that subside a little bit, so, good news for employers on that front. And good news for job seekers, there’s still plenty of opportunities out there.”
She added: “Right now we’re in a really well-balanced moment.”
