December 3, 2022

In October, US job growth was the slowest in nearly two years, with the unemployment rate rising

  • Nonfarm payrolls are forecast to increase by 200,000
  • The unemployment rate rose from 3.5% to 3.6%.
  • Average hourly earnings are expected to increase by 0.3%

WASHINGTON, Nov 4 (Reuters) – U.S. employers may have hired the fewest workers in nearly two years in October and raised wages at a moderate pace, signaling some easing in labor market conditions that will allow the Federal Reserve to move interest rates a little. Starting in December.

The closely watched employment report from the Labor Department on Friday showed unemployment expected to be 3.6%, up from 3.5% in September. The central bank on Wednesday delivered another 75-basis-point interest rate hike and said borrowing costs would need to rise further in its fight against inflation.

But the central bank has signaled it may be nearing a tipping point where monetary policy has tightened at the fastest pace in 40 years.

“The labor market is basically OK, but it appears to be slowing,” said Guy Berger, chief economist at LinkedIn.

In San Francisco. “The Fed will try to pull the needle on slowing the labor market long enough to put downward pressure on wages and inflation without triggering a recession.”

According to a Reuters poll of economists, jobs may have increased by 200,000 last month, after a rise of 263,000 in September. This would be the smallest gain since December 2020, when wages fell under the onslaught of COVID-19 infections. Estimates range from 120,000 to 300,000.

According to recent trends, employment gains are almost evenly distributed across industry sectors, with the leisure and hospitality industry leading the way. Leisure and hospitality employment is at least a million jobs below its pre-pandemic level. Interest rate-sensitive industries such as financial services, transportation and warehousing are likely to lose jobs as they did in September. The government payroll is further reduced.

Hurricane Ian is expected to have put a slight dent in the payroll. The storm hit Florida in late September and boosted jobless claims in mid-October, when the government surveyed businesses for last month’s employment report.

“Hurricane Ian should have at least some downward impact on nonfarm payrolls,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. “Based on the assumption that at least some workers have been sidelined in areas hit hard by the hurricane, we have slightly lowered our forecast to show an increase of 150,000 (from 200,000).”

Backfill levels

Job growth was firm despite subdued domestic demand amid higher borrowing costs as firms replace workers who left. But with recession risks rising, this practice may end soon. A survey by the Institute for Supply Management on Thursday found that due to uncertain economic conditions, some service-sector companies “have held off on backfilling open positions.”

However, the labor market remains tight, with 1.9 job openings per unemployed person at the end of September.

Average hourly earnings are forecast to rise 0.3%, matching September’s gain. But there is a risk of a reverse surprise due to Hurricane Ian and calendar quirks. According to Wrightson ICAP’s Crandall, storms and other events that keep people out of work during payroll survey week can artificially inflate the level of hourly earnings.

The government surveys businesses and households during the week that includes the 12th day of the month.

“The payroll survey week includes the 15th of the month, which tends to be more month-over-month change because more wage increases are given in the middle of the month and at the end of the month instead of two weeks. Captured,” said Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut.

Wage growth is cooling, removing any distortions from weather and calendar vagaries. After rising 5.0% in September, average hourly earnings are forecast to increase 4.7% year-over-year in October. Other wage measures have also come off the boil, which bodes well for inflation.

“We believe we’ve seen a peak in wage growth,” said Michael Green, chief economist at Priveter in Columbus, Ohio. “So while we’re seeing year-over-year growth in average hourly earnings across all private sector workers, the pace of that growth is actually starting to slow.”

Report by Lucia Muticani; Editing by Cynthia Osterman

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