This year, the labor market has been undergoing a notable cool-down, across many sectors, from its red-hot peak after the pandemic when employers rapidly created millions of jobs to keep up with pent-up consumer demand. October’s job gains mark the second-lowest increase since 2020, and jobs figures for August and September were revised down by 101,000.
Wage growth moderated slightly in October, rising by 4.1 percent over the previous 12 months to $34 an hour but continuing to beat inflation and boost workers’ spending power.
“This report shows a lot of weakening on the surface, but it was clearly clouded by a lot of strike activity that now seems to be resolved,” said Aaron Terrazas, chief economist at Glassdoor. “Once you squeeze past the one-off shocks in October, it’s actually a relatively strong report.”
The unemployment rate, which hit longtime lows not seen since the late 1960s, has increased by half a percentage point since April with about 849,000 more workers reporting that they are unemployed. Still the percentage of Americans who are unemployed has been below 4 percent for nearly two years, a sign that the labor market remains much stronger than usual for workers.
And the increase in unemployment appears to be due to a rise in new workers entering the labor market, rather than people losing their jobs. New job seekers are probably part of the wave of immigrants who have been arriving in the United States.
“Hiring has really slowed down, and that seems to be driving this increase in unemployment without a wave of layoffs,” said Preston Mui, senior economist at Employ America, a Washington think tank. “If you start to see layoffs, you’re in trouble. The question is, can we get much more softening of hiring without seeing an actual increase in layoffs?”
The major stock indexes jumped with Friday’s news of easing job gains and tempering wage growth, as odds increase that the Federal Reserve will move to lower interest rates in 2024.
President Biden released a statement cheering the jobs report as a sign that his economic agenda is succeeding and that American workers are “defying projections that it would take a sharp increase in unemployment to bring inflation down.”
The wave of heightened strikes across the United States, which included 45,000 United Auto Workers members on strike in October, also appeared in the October report, as manufacturing job growth slid by 35,000. In the long term, though, the autoworkers’ new contracts are likely to push wages higher across affected industries.
Hiring in health care, government and social assistance jumped in October, as consumers have continued to shift their spending toward services. Health care added 58,000 jobs, as employment grew in ambulatory health-care services and hospitals. Government, which has struggled since the pandemic to attract and retain workers, added 51,000 jobs, with the largest gains in local government. Public-sector hiring has finally returned to pre-pandemic levels.
Despite hefty interest rate hikes that are expected to curb spending in the construction sector, the industry added about 23,000 jobs, mainly in specialty trades and the construction of buildings, as a backlog of demand has kept the industry afloat.
Meanwhile, employment in leisure and hospitality, professional and business services, and information, which includes tech and the strike-impacted motion picture industry, saw little to negative growth.
Despite this cooling, the resilient job market is propelling the economy to unexpected highs. The U.S. economy grew at a brisk 4.9 percent annual rate in the most recent quarter, in large part because consumers have the means to keep spending. Wages are rising and inflation has eased in recent months. And fresh data this week shows that productivity is growing by the fastest pace in three years.
As a result, Americans are continuing to open their wallets. Spending on housing and transportation, as well as hotels, restaurants and sporting events, all rose in September, government data shows, helping support a range of new service jobs.
“If you have a full-employment labor market with the pressures of inflation easing, such that you generate real wage gains — in an economy that’s 70 percent consumer spending, that’s a powerful force with real momentum,” Jared Bernstein, chair of the U.S. Council of Economic Advisers, said in an interview this week.
That solid showing is in stark contrast to widely held recession fears at the start of the year. Many, including the Federal Reserve chair, had expressed concerns that the central bank’s aggressive push to bring down inflation would result in job losses across sectors and could tip the economy into a downturn. That hasn’t happened, at least not yet, even as inflation has eased — to 3.7 percent in September, from last summer’s high of 9.1 percent. This week, Fed Chair Jerome H. Powell announced that he would leave interest rates unchanged for now, while calling the job market’s resilience a “historically unusual and very welcome result.”
“The bigger picture, from our standpoint, is: We’ve got a very strong economy, strong labor market,” Powell said.
Indeed, recent data confirms that the labor market remains robust by many measures. Job openings ticked up slightly to 9.6 million in September, according to the BLS’s job openings survey released Wednesday, meaning there are roughly 1.6 openings for every unemployed worker. Layoffs fell to a nine-month low in September, data from the same report showed.
Justin Bloesch, a professor of economics at Cornell University, said uncertainty about the future could be pushing employers to hold onto workers rather than conduct layoffs. “Employers don’t know if things are going to boom or slow down,” he said. “So one of the best things to do in the face of uncertainty is hold on to the workers you have.”
While overall strong job creation has been drawing workers back into the labor market, those numbers dropped slightly in October. The share of adults between the ages of 25 and 54 participating in the labor market — a metric closely watched by policymakers as a sign of labor market health — is still considered strong, hitting a level not seen since before the Great Recession, at 83.3 percent in October.
The public sector, which has struggled since the pandemic to retain workers, is finally beginning to see a boost in job creation, as wage growth in local and state government surpassed the private sector in the most recent quarter.
Edward Watson, 35, a utilities technician for the city of Ontario, Calif., had been thinking about quitting his local-government job for a higher-paying one. His wage increases of around 2 or 3 percent a year weren’t keeping up with the cost of living, making it difficult to support his wife and three children. Meanwhile, work had become more stressful as his co-workers retired or quit during the pandemic.
But this summer, Watson’s local chapter of the American Federation of State, County and Municipal Employees union secured a 27.5 percent raise for city workers over the next three years, giving Watson a reason to stay and enticing some of his former co-workers back to work for the city. He received a 9.5 percent wage boost in July and is now making around $36 an hour.
“I’m able put a little more into savings. It helps at the grocery store,” Watson said. “I think a lot of people have a lot more confidence now that they can stay in their jobs with the city.”
