- The Labor Department said Friday that the unemployment rate rose from 3.5% to 3.7%.
- Economists estimated that 190,000 jobs were added last month.
- Employers added 261,000 jobs despite rising inflation, higher interest rates and growing recession fears.
Employment remained strong in October as employers added 261,000 jobs despite rising inflation, higher interest rates and growing recession fears.
The Labor Department said Friday that the unemployment rate rose from 3.5% to 3.7%.
Economists estimated that 190,000 jobs were added last month. The actual gain was the smallest since December 2020.
However, in another sign of a vibrant job market, job gains for August and September were revised upwards by 29,000 net, with September now advancing 315,000, up from 263,000.
In recent months, job growth has fallen from a solid average monthly pace of more than 400,000 for most of this year to about 290,000 in the past three months, but it has held up. The persistent shortage of workers has prompted companies to avoid layoffs over concerns that they won’t be able to fill the slots when the economy recovers.
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Total initial jobless claims, a measure of layoffs, hit a historic low of 217,000 last week.
Healthcare led job gains in October with 53,000 jobs. Professional and business services added 39,000; Leisure and Hospitality, 35,000, with hotels occupying the bulk of the new positions; and Manufacturing, 32000.
Federal, state and local governments added 28,000 jobs.
“The economy seems to be on par in this jobs report,” says Jane Oates, president of WorkingNation, a nonprofit that raises awareness of the challenges facing American workers and former head of the Department of Labor’s Employment and Training Division.
Stocks react to the jobs report
Stocks were moving higher after the better-than-expected jobs report until around noon when the Dow, S&P 500 and Nasdaq turned negative.
What is the labor force participation rate?
In a sign that labor shortages may persist, the proportion of adults working or looking for work has fallen to 62.2%, putting it well below the pre-pandemic level of 63.4%. The labor force participation rate has been on the rise overall since 2020 as workers returned to the hot labor market after childcare or remaining unemployed due to COVID-19 concerns.
But that quota has remained roughly flat this year, suggesting that most Americans intent on returning to the workforce have done so. This can lead to continued upward pressure on wages as employers crowd out a limited group of workers.
Last month, average hourly wages rose 12 cents to $32.58, cutting the annual increase from 5% in August to 4.7%.
Economists say the prospect of persistent labor shortages and increased wage growth will likely mean more substantial interest rate increases by the Federal Reserve, which is determined to tame inflation stuck below a 40-year high of 8.2%.
“This report is a green light for further Fed rate hikes and rate hikes,” says Jason Schenker, president of Prestige Economics.
Are we in a recession now?
The Fed’s moves are increasingly expected to dampen borrowing and economic activity, and leading economists are now forecasting a recession in 2023. As a result, many companies are bringing back hiring plans.
Identity, a 33-employee marketing and PR firm headquartered in Birmingham, Michigan, added three employees this year and, with a 10% increase in sales, was set to bring in two more.
But company president Mark Winter is growing wary.
“We haven’t seen a slowdown in trade demand but we know it’s coming,” Winter says.
So rather than expanding his workforce full-time, Winter is relying more on freelancers for web development, writing, media relations, and social media projects to “make sure we have more flexibility.”
Workers are also worried about a looming recession. Candidates for jobs on LinkedIn, on average, send 18% more applications than they did a year ago in a sign that it’s becoming harder to get a job, according to the career networking platform. Also, Linkedin posts mentioning “laying off” or cutting expenses increased 17.9% compared to last year.
Is there still a labor shortage?
At the same time, a labor shortage prompted companies to add furloughed workers early in the season, a development that was likely to boost job growth in October, says Spencer Hill, an economist at Goldman Sachs.
And job opportunities increased from 10.4 million to 10.7 million in September after falling from record levels in previous months. There are still nearly two vacancies for every unemployed adult in the United States
However, there is no doubt that a slowdown is coming, economists say. Morgan Stanley says many companies that are replacing existing workers who are leaving will likely stop doing so in the coming months. This “could lead to a faster-than-normal collapse in job growth,” the research firm says.
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Instead of closing some jobs, Winter says he’s turning to the self-employed.
By early next year, job growth is likely to have stalled, says economist Nancy Vanden Houten of Oxford Economics. Mark Zandi of Moody’s Analytics expects such a stall to occur in the second quarter.
“Our conversations with executives indicate that hiring demand will clearly deteriorate in the coming months as companies face weaker sales domestically and overseas, continued cost pressures, and tighter financing terms,” E Parthenon wrote in a note to clients.
That may be worrying for job seekers, but it welcomes news of the Federal Reserve looking at a dip in employment and wage growth to determine if inflation is easing enough to halt its aggressive rate-raising campaign. This week, the Federal Reserve approved the fourth consecutive rate increase of three-quarters of a point.
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CPI release date
The next big report that economists have been waiting for is the October Consumer Price Index. This is due Thursday, November 10 at 8:30 a.m. ET. The new data could help determine the size of the upcoming Fed rate hikes. If inflation drops, the Fed may be more inclined to force a smaller rate increase at its last meeting of the year next month.
Biden on inflation concerns, October jobs report
President Joe Biden celebrated Friday’s jobs report, saying, “As long as I’m president, I won’t accept the argument that the problem is that too many Americans are finding good jobs.”
“Inflation is the biggest economic challenge for us,” he said. “We will do what it takes to bring down inflation.”
layoffs on twitter
Today Twitter is expected to announce mass layoffs, according to many Reports. This comes after Elon Musk took over Twitter and became its CEO. About 3,750 workers are expected to be affected by layoffs, half of its current workforce, according to The Verge.
Amazon and Apple shares
Both Amazon and Apple announced a hiring halt yesterday. The Amazon stoppage is for all corporate roles while Apple is limited to jobs outside of research and development.
Both Apple and Amazon shares fell around 12 PM ET.
layoff news
Although the job market is relatively strong at the moment, there are some cracks. Tech companies in particular face challenges. On Thursday, Lyft and payment processing company, Stripe, announced plans to cut 13% and 14% of their workforce, respectively, CNBC mentioned.
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Work from home:Could a refusal to return mean layoffs? The changing tide of the labor market may change the rules.
Why is the jobs report so important?
One of the reasons the jobs report is so important is that the Fed treated it so hard in the jobs report decisions about interest rates. Since the labor market is fairly robust despite the increased possibility of a recession, the Fed is able to raise interest rates in an effort to bring down inflation without worrying that it will lead to higher unemployment. But that could change as the central bank imposes more rate hikes.
What does the jobs report indicate?
The jobs 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 policy makers. It indicates how many people stop looking for jobs or stop working, how much workers in a wide range of industries earn, and where hiring takes place most often among other information.
What is the next jobs report?
The next jobs report will be released on Friday, December 2. It will cover employment trends for the month of November.
Fix
The Cboe Volatility Index, or VIX, a market indicator of expected volatility over the next 30 days, has fallen slightly since the jobs report. It recently hit a 6-week low indicating that investors are less vigilant about market expectations.
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Elizabeth Buchwald is the Personal Finance and Markets Correspondent for USA TODAY. Could you FFollow her on Twitter @BeachElisabeth and subscribe to our Daily Money newsletter over here
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