Job growth was stronger than expected in October, despite the Federal Reserve’s interest rate hikes to slow down the still strong labor market.
Nonfarm payrolls grew 261,000 for the month, while the unemployment rate rose to 3.7%, the Labor Department reported Friday. Those wage numbers were better than the Dow Jones estimate for 205,000 more jobs, but worse than the 3.5% estimate for the unemployment rate.
While the number was better than expected, it was still the slowest pace of job growth since December 2020.
Average hourly wages grew 4.7% from a year ago and 0.4% for the month, indicating that wage growth is likely to continue to act as price pressures as workers’ wages are still well below inflation . Annual growth was in line with expectations, while monthly profits were slightly above the estimate of 0.3%.
Healthcare led to job growth, with 53,000 jobs, while professional and technical services contributed 43,000 and manufacturing grew 32,000.
Leisure and hospitality also posted solid growth, adding 35,000 jobs, although the pace of increases has slowed significantly from 2021 earnings. The group, which includes jobs in hotels, restaurants and bars, along with related sectors , is posting an average profit of 78,000 per month this year, compared to 196,000 last year.
Heading into the Christmas shopping season, the retail industry posted only modest gains of 7,200 jobs. Wholesale was added by 15,000, while transport and storage increased by 8,000.
The unemployment rate rose by 0.2 percentage point, while the employment rate fell by a tenth point to 62.2%. An alternative measure of unemployment, including discouraged workers and those in part-time employment for economic reasons, also rose to 6.8%.
Stock market futures rose after the release of the nonfarm payrolls, while government bond yields were also higher.
The September job count was revised higher to 315,000, an increase of 52,000 from the original estimate. The August number fell by 23,000 to 292,000.
The new numbers come as the Fed is campaigning to cut inflation at an annual rate of 8.2%, according to a government gauge. Earlier this week, the central bank approved its fourth consecutive rate hike of 0.75 percentage point, bringing benchmark interest rates to a range of 3.75%-4%.
Those increases are partly intended to cool a job market where there are still nearly two jobs for every available unemployed person. Even at the slower pace, job growth was well above pre-pandemic levels, when monthly wage growth averaged 164,000 in 2019.
But Tom Porcelli, chief US economist at RBC Capital Markets, said the broader picture is a slowly deteriorating labor market.
“This thing isn’t falling off a cliff. It’s a gravel in a slower background,” he said. “It works like this every time. So the fact that people want to hang their hats on this lagging indicator to determine where we’re going is kind of laughable.”
There have indeed been signs of cracks lately.
Amazon on Thursday it said it is suspending hiring positions in its corporate workforce, an announcement that came after the online retail giant said it was halting new hires for its corporate retail jobs.
Also, Apple said it will freeze new employees except for research and development. Ride-hailing company Lyft reported it will cut 13% of its workforce, while online payment company Stripe said it would cut 14% of its employees.
Fed Chair Jerome Powell characterized the job market as “overheated” on Wednesday and said the current pace of wage growth is “well above” what would be in line with the central bank’s 2% inflation target.
“Demand is still high,” said Amy Glaser, senior vice president of business operations at Adecco, a human resources and recruiting firm. “Everyone expects at some point we will see a shift in demand. But so far we continue to see the labor market defying the law of supply and demand.”
Glaser said demand is especially strong in warehousing, retail and hospitality, the sectors hardest hit by the Covid pandemic.
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