- The number of non-agricultural employees rose by 150,000 in October
- Auto strikes reduce payroll by 33,000 jobs
- Unemployment rate rises from 3.8% to 3.9%
- Average hourly wage increase of 0.2%; 4.1% more than in the previous year
WASHINGTON, Nov 3 (Portal) – U.S. job growth slowed in October partly as strikes by the United Auto Workers (UAW) union against Detroit’s “Big Three” automakers depressed manufacturing payrolls and the increase of annual wages was the lowest in almost 2 1/2 years, indicating an easing in labor market conditions.
The Labor Department’s closely watched jobs report on Friday also showed the unemployment rate rose to 3.9% last month from 3.8 in September, the highest level since January 2022.
The economy added 101,000 fewer jobs in August and September than previously estimated, also pointing to weakening labor market momentum. The report bolstered financial markets’ expectations that the Federal Reserve is done raising interest rates for the current cycle and improved the chances that the U.S. central bank will engineer a “soft landing” for the economy, rather than it, as some economists have suggested had feared falling into a recession.
“This is a very Fed-friendly report,” said Sal Guatieri, senior economist at BMO Capital Markets in Toronto. “The only criticism is that the workforce has shrunk. Still, the overall weakness of the report will help move the Fed from sitting on the sidelines in December to meeting for the third straight day.”
Nonfarm payrolls rose by 150,000 jobs last month after rising by 297,000 in September, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Portal had forecast an increase in the number of employees by 180,000.
About 52.0% of private sector companies reported employment gains, the lowest since April 2020, compared with 61.4% in September, the survey of establishments showed.
Manufacturing employment fell by 35,000, with the UAW strike affecting factories owned by Ford Motor (FN), General Motors (GM.N) and Chrysler parent Stellantis (STLAM.MI), as well as Mack Trucks plants 33,000 jobs were lost.
In addition to the now-ended labor disputes, the slowdown in employment gains last month paid off after September’s gains, which were the biggest in eight months.
Although hiring is slowing as a result of the cumulative impact of the Fed’s rate hikes, wage gains continue to be well above the roughly 100,000 jobs per month needed to keep pace with the growth of the working-age population.
“A wage increase of 150,000 is not bad, and 180,000 – what it would have been without the strike and the side effects – is solid,” said Chris Low, chief economist at FHN Financial in New York. “At least until we see what the situation looks like after the strike, there is no need to worry about excessive weakness.”
Last month’s increase in hiring was largely driven by the health care sector, which added 58,000 jobs, the majority of them in outpatient health care. Government employment increased by 51,000 jobs, returning to pre-pandemic levels. The increase in public sector employment was driven by new hires in local government.
The construction industry created 23,000 new jobs. There were also gains in welfare and professional and business services payrolls, with temporary worker positions – a harbinger of future hiring – rising after eight straight monthly declines. Leisure and hospitality employment increased by 19,000, well below the monthly average of 52,000 over the past 12 months.
The transportation and warehousing and information industries suffered job losses and continued to suffer from an ongoing strike in Hollywood.
Financial markets overwhelmingly expect the Fed to leave interest rates unchanged in December and January, according to CME’s FedWatch tool. Stocks on Wall Street recovered. The dollar fell against a basket of currencies. U.S. Treasury prices rose, with the yield on the benchmark 10-year note hitting a five-week low.
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Wage growth is cooling
The Federal Reserve left interest rates unchanged on Wednesday but left the door open for another rise in borrowing costs to signal the economy’s resilience. Since March 2022, it has raised its key interest rate by 525 basis points to the current range of 5.25% to 5.50%.
Average hourly wages rose 0.2% in October after rising 0.3% in September. In the 12 months to October, wages rose 4.1%, the smallest increase since June 2021, after rising 4.3% in September. The average weekly working time fell from 34.4 hours to 34.3 hours. The total number of hours worked fell by 0.3%. Both reflected the impact of the car strikes on the economy.
The labor market is the most important driver of the economy’s endurance: gross domestic product recorded an annual growth rate of almost 5% in the third quarter.
Although wage pressures are easing due to recent labor supply expansion and fewer people are changing jobs, annual growth in average hourly wages remains above the 3.5% that economists say is consistent with the Fed’s 2% target.
“We will see a significant slowdown in growth in the fourth quarter, but not in a way that will tip us into any kind of recession,” said Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida.
Economists were divided over the impact on wage inflation of record-breaking labor contracts, including those of the UAW, airline pilots and the union that represents UPS workers.
Some argued that the recent increase in labor productivity, if sustained, would be enough to offset higher compensation. Others pointed out that the U.S. economy is now predominantly services-based, which would make it harder to increase productivity.
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The smaller household survey from which the unemployment rate is derived also revealed a decline in labor market dynamics. Household employment fell by 348,000, explaining the increase in the unemployment rate. The strike also affected the unemployment rate. Around 201,000 people left the labor market.
As a result, the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for a job, fell to 62.7% from 62.8% in September.
The labor force participation rate in the main age group fell, mainly due to men leaving the workforce.
The number of Americans with long-term unemployment rose by 66,000 to 1.282 million. The number of people working part-time for economic reasons rose by 218,000 to 4.283 million. There was also an increase in the number of people working multiple jobs.
“The October jobs report, coupled with the third-quarter productivity and cost report, clearly shows that the economy has already moved toward a potentially more sustainable path of low inflation and solid potential growth,” said Brian Bethune, an economics professor at Boston College .
Reporting by Lucia Mutikani; Edited by Nick Zieminski and Paul Simao
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