New York, USA (CNN) – The US job market is showing signs of slowing as the Department of Labor announced a slowdown in hiring and an increase in unemployment on Friday.
Although the carefully observed October employment report was solid by historical standards, it indicates that a series of rate hikes by the Federal Reserve aimed at calming the economy have so far had only limited impact on employers’ willingness to hire more workers.
The report showed that employers added 261,000 jobs in October and the unemployment rate rose to 3.7% from 3.5% in September.
This is less than the revised September figure of 315,000 monthly jobs, albeit more than the 200,000 economists expected.
October marks the smallest monthly job increase for the US economy since December 2020. But it’s also a solid gain by historical standards. The economy added an average of 183,000 jobs per month in the decade leading up to the pandemic.
“The stronger-than-expected report illustrates the difficult task the Fed still faces in the face of a resilient labor market and steady inflation,” said Mike Lowingart, of Morgan Stanley’s Global Investments office.
Economists had expected a minor rise in the unemployment rate to just 3.6%. The unemployment rate is calculated using a separate household survey rather than the employer survey used to count the number of workers.
Even the higher-than-expected unemployment rate remains low by historical standards: the September reading of 3.5% corresponded to a half-century low.
What does all of this mean for inflation and the Federal Reserve?
Federal Reserve Chairman Jerome Powell warned that the economy may need to lose jobs as part of the central bank’s battle to curb economic growth as a way to combat rising prices. The continued strength of the labor market could leave the door open for the Federal Reserve to continue raising interest rates in its next few meetings.
Several economists said Friday they believe the Fed could slow the pace of interest rate hikes to half a percentage point, instead of the three-quarter point agreed in recent meetings.
“The bottom line here is that the job market is in decline, but it hasn’t yet reached the point where the data is screaming at the Fed to stop souring,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “But if these trends continue, as we expect, the markets will begin to push the Fed – and in particular President Powell – to rethink the idea of continuing to rise until next year.”
Labor Secretary Marty Walsh hailed the job report as good news.
“Obviously 261,000 jobs are a great thing,” he told CNN in an interview Friday morning after the job report. However, she noted that while total employment is now higher than before the pandemic, there are still some sectors where employment has not yet returned to pre-pandemic levels.
But he recognized that even with a strong job market, it’s higher prices, not jobs, that most Americans have in mind.
