- The unemployment rate fell from 3.5% to 3.7%, the Labor Department announced on Friday.
- Economists had estimated that 190,000 jobs had been created last month.
- Employers added 261,000 jobs despite high inflation, rising interest rates and growing fears of recession.
Hiring remained strong in October as employers added 261,000 jobs despite high inflation, rising interest rates and growing recession fears.
The unemployment rate fell from 3.5% to 3.7%, the Labor Department announced on Friday.
Economists had estimated that 190,000 jobs had been created last month. The actual gain was the smallest since December 2020.
In recent months, job growth has fallen from a robust average monthly pace of over 400,000 for most of this year to around 290,000 over the past three months, but has remained resilient. Ongoing labor shortages have led companies to avoid layoffs for fear of not being able to fill vacancies when the economy rebounds.
Initial jobless claims, an indicator of layoffs, totaled a historic low of 217,000 last week.
Health care led October job gains with 53,000. Professional and business services added 39,000; leisure and hospitality, 35,000, with hotels accounting for most of the new jobs; and manufacturing, 32,000.
Federal, state and local governments added 28,000 jobs.
In a sign that labor shortages may persist, the share of adults working or looking for work fell slightly to 62.2%, leaving it well below pre-pandemic levels. 63.4%. The labor force participation rate has generally increased since 2020 as workers return to a hot labor market after caring for children or remaining inactive due to COVID-19 fears.
But that share has remained roughly flat this year, signaling that most Americans wanting to get back into the workforce have done so. That could keep upward pressure on wages as employers scramble for a smaller pool of workers.
Last month, the average hourly wage rose 12 cents to $32.58, bringing the 5% annual increase in August down to a still healthy 4.7%.
The prospect of lingering labor shortages and strong wage growth will likely mean bigger interest rate hikes by a Federal Reserve determined to tame inflation stuck just below a 40 high. years to 8.2%, according to economists.
“This report is a green light for further Fed rate hikes and higher interest rates,” said Jason Schenker, president of Prestige Economics.
Is a recession coming in 2023?
Fed measures are expected to increasingly discourage borrowing and economic activity, and top economists are now forecasting a recession in 2023. As a result, many companies are canceling hiring plans.
Identity, a 33-employee marketing and public relations firm based in Birmingham, Michigan, added three employees this year and, with sales up 10%, was expected to hire a few more.
But company president Mark Winter is getting cautious.
“We haven’t seen a slowdown in business demand, but we know it’s coming,” says Winter.
So instead of expanding its full-time workforce, Winter relies more on freelancers for web development, writing, media relations and social media projects “to ensure we have more flexibility. “.
Is there still a labor shortage?
At the same time, labor shortages have prompted companies to add holiday workers at the start of this season, a development that should support job growth in October, according to Goldman economist Spencer Hill. Sachs.
Job vacancies rose from 10.4 million to 10.7 million in September after hitting record highs in previous months. There are still nearly two job vacancies for every unemployed adult in the United States
Still, there’s no doubt a downturn is ahead, economists say. Many companies that replace existing workers who depart will likely stop doing so in the coming months, Morgan Stanley said. This “could lead to a faster-than-normal collapse in job growth,” the research firm says.
Rather than replacing some jobs, Winter says he’s turning to freelancers.
Early next year, job growth will likely come to a halt, according to economist Nancy Vanden Houten of Oxford Economics. Mark Zandi of Moody’s Analytics expects such a dropout to occur in the second quarter.
That would be worrisome for job seekers, but good news for a Fed that is looking for a pullback in job and wage growth to determine if inflation is cooling enough to suspend its aggressive rate-hike campaign. . This week, the Fed approved its fourth straight three-quarter point rate hike.
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Layoffs on Twitter
Twitter is expected to announce mass layoffs today, according to multiple reports. It comes after Elon Musk took over Twitter and became its CEO. According to The Verge, about 3,750 workers are expected to be affected by the layoffs, half of its current workforce.
Amazon and Apple stocks
Amazon and Apple announced hiring breaks yesterday. Both stocks rose more than 1% in premarket trading.
Amazon’s hiring pause affects all roles in the company, while Apple’s only affects jobs outside of research and development.
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Even though the labor market is relatively strong right now, there are cracks. Tech companies in particular face challenges. On Thursday, Lyft and payment processing company Stripe announced plans to cut 13% and 14% of their workforces, respectively, CNBC reported.
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Why is the jobs report so important?
One of the reasons the jobs report is so important is that the Federal Reserve incorporates it heavily into its interest rate decisions. Since the labor market is quite strong despite the growing prospect of a recession, the Fed is able to raise interest rates in an effort to reduce inflation without fear that this will lead to a spike in unemployment. . But that could change as the central bank imposes further rate hikes.
What does the employment report say?
The employment report is one of the best indicators of the state of the labor market. Besides the headline unemployment rate, the report is a goldmine of data for economists, investors and policymakers. It shows how many people have stopped looking for work or stopped working, how much workers earn in a wide range of industries, and where hiring is happening the most, among other information.
When is the next jobs report?
The next employment report will be published on Friday 2 December. It will cover employment trends in November.
The Cboe Volatility Index, or VIX, a market gauge of expected volatility over the next 30 days, is up slightly ahead of the jobs report. It recently hit a nearly 6-week low, indicating that investors are less uncertain about the market outlook.
Futures contracts on Dow
Ahead of the jobs report, futures traded on the Dow Jones Industrial Average are up. This follows increased volatility on Wednesday stemming from the Fed’s decision to raise interest rates an additional 75 basis points.
Meanwhile, the Dow Jones had its best October ever with its 14% gain. It was also his best month since 1976.
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Elisabeth Buchwald is personal finance and markets correspondent for USA TODAY. You can FFollow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here