U.S. Jobs Data Shows Broad Cooling
Some cracks are beginning to form in a jobs market that has been gradually normalizing, thanks to an improvement in labor supply over the past year and a tempering in the pace of hiring.
U.S. job growth slowed by more than expected, and the unemployment rate rose to an almost two-year high of 3.9 percent, indicating that employers’ strong demand for workers is beginning to cool.
Nonfarm payrolls increased 150,000 in October following downward revisions to the prior two months, a Bureau of Labor Statistics (BLS) report showed Friday. Monthly wage growth slowed.
The latest figures suggest some cracks are beginning to form in a jobs market that has been gradually normalizing, thanks to an improvement in labor supply over the past year and a tempering in the pace of hiring.
The rise in the unemployment rate points to a pickup in layoffs—a development employers had so far broadly avoided. The survey of households showed a more than 200,000 increase in those who lost their job or completed a temporary one.
The S&P 500 opened higher, Treasuries rallied and the dollar weakened, as investors judged it more likely the Federal Reserve is finished with its run of interest-rate hikes. Traders marked down the chance of a rate increase in coming months and boosted bets on an earlier cut next year.
| Metric | Actual | Median estimate |
|---|---|---|
| Change in payrolls (month-over-month) | +150,000 | +180,000 |
| Unemployment rate | 3.9% | 3.8% |
| Average hourly earnings (month-over-month) | +0.2% | +0.3% |
Healthcare and social assistance, as well as government, drove the payrolls gain. Other categories, however, showed tepid growth or outright declines. Manufacturing payrolls fell by 35,000 in October, largely a reflection of the United Auto Workers union strike. The hit will prove temporary, though, given that union members have since struck tentative deals with the nation’s largest automakers.
Looking ahead, sustained setbacks in the labor market—the bedrock of consumer spending and the broader economy—risk raising concerns about the nation’s ability to weather high interest rates without falling into recession.
“Today’s jobs report is consistent with both a mild loosening of the labor market on the way to a soft landing, and potentially the beginning of a more troubling downturn,” Nick Bunker, head of economic research at Indeed Hiring Lab, said in a note.
The figures come on the heels of the Fed’s decision to hold off on raising interest rates for a second straight meeting. Fed Chair Jerome Powell hinted that the central bank may be finished with rate hikes, a decision that would be reinforced in the months ahead by a further easing in labor demand.
Easing demand for workers is putting downward pressure on wage growth. Average hourly earnings rose 0.2 percent last month and were up 4.1 percent from a year earlier, the smallest annual advance since mid-2021. Earnings for nonsupervisory employees, who make up the majority of workers, increased 0.3 percent for a second month.
In a departure from the recent trend, the supply of labor declined, prompting a drop in the labor force participation rate—the share of the population that is working or looking for work—to 62.7 percent. For those ages 25 to 54, participation decreased to a six-month low, driven by men.
What Bloomberg Economists Say…
“The October jobs report was uniformly discouraging for job seekers, but encouraging for the Federal Reserve as it looks to bring inflation to its 2 percent target. The biggest signal from the report was the uptick in the unemployment rate—that outweighs the significant slowdown in headline nonfarm payrolls and large negative revisions, in our view.”
— Anna Wong, Stuart Paul, Eliza Winger & Estelle Ou
The jobs report is composed of two surveys: one of households and one of businesses. While both showed signs of weakening, the households poll was particularly concerning, due to rising unemployment, declining labor force participation, and a drop in the number of employed workers.
The smaller gain in payrolls, combined with slower wage growth and a drop in hours worked, led a broad measure of labor market health to stagnate. Moreover, a gauge of take-home pay declined by the most since the start of 2022.
Following the report, Acting U.S. Labor Secretary Julie Su emphasized that “these numbers are still inconsistent with a recession.”
“We’re continuing to see job creation and confidence, and workers in the labor market and employers opening up businesses and continuing to create jobs,” she said on Bloomberg Television.
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