Job growth was stronger than expected in October despite Fed rate increases aimed at slowing what remains a strong labor market.
The Labor Department reported Friday that nonfarm payrolls grew by 261,000 in the month while the unemployment rate rose to 3.7%. These payroll numbers were better than the Dow Jones estimate of 205,000 additional jobs, but worse than the 3.5% estimate for the unemployment rate.
Although the number was better than expected, it still represented the slowest pace of job gains since December 2020.
Average hourly earnings grew 4.7% from a year ago and 0.4% for the month, indicating that wage growth is still likely to put pressure on prices as worker wages remain well below the inflation rate. Annual growth met expectations while monthly gains were slightly above the 0.3% estimate.
Health care led job gains, adding 53,000 jobs, while professional and technical services contributed 43,000, and manufacturing grew by 32,000.
Leisure and hospitality also posted strong growth, with 35,000 jobs increasing, although the pace of increases slowed significantly from gains made in 2021. The group, which includes hotel, restaurant and bar jobs along with related sectors, posted average gains of 78,000 per month this year, compared to 196 thousand last year.
With the holiday shopping season approaching, the retail business posted a modest gain of 7,200 jobs. Wholesale trade added 15,000, while transportation and warehousing increased 8,000.
The unemployment rate rose 0.2 percentage point even though the labor force participation rate fell by one tenth of a point to 62.2%. An alternative measure of unemployment, which includes discouraged workers and those who take part-time jobs for economic reasons, also rose to 6.8%.
Stock market futures rose after the non-farm payrolls release, while Treasury yields rose as well.
The number of jobs in September was revised up, to 315,000, 52,000 more than the original estimate. The August count decreased by 23,000 to 292,000.
The new numbers come as the Federal Reserve is campaigning to bring down inflation at an annual rate of 8.2%, according to one government measure. Earlier this week, the central bank approved a fourth consecutive rate increase by 0.75 percentage points, raising its benchmark borrowing rates to a range of 3.75%-4%.
These hikes are intended in part to cool the labor market as there are still nearly two jobs for every unemployed worker available. Even with the lower pace, job growth was well ahead of the pre-pandemic level, with monthly salary growth reaching 164,000 in 2019.
But Tom Purcelli, chief US economist at RBC Capital Markets, said the broader job market picture is slowly deteriorating.
“This thing doesn’t fall off a cliff. It’s grinding in a slower background,” he said. “It works that way every time. So the fact that people want to hang their hat on this late indicator to decide where we’re going is kind of funny.”
In fact, there have been signs of cracks occurring recently.
Amazon On Thursday, it said it would temporarily halt hiring for roles in the company’s workforce, an announcement that came after the online retail giant said it was halting new hires for corporate retail jobs.
also, apple It said it would freeze new hires except for research and development. Car rental company Lift It stated it would cut 13% of its workforce, while online payment company Stripe said it would cut 14% of its workers.
Federal Reserve Chairman Jerome Powell on Wednesday described the labor market as “hyperactive” and said the current pace of wage gains was “much higher” in line with the central bank’s 2% inflation target.
“Demand remains strong,” said Amy Glaser, vice president of business operations at Adecco, a placement and placement company. “Everyone expects at some point that we will start to see a shift in demand. But so far we have still seen the labor market defying the law of supply and demand.”
Demand is particularly strong for warehousing, retail and hospitality, which is the sector worst hit by the Covid pandemic, Glaser said.
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