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In October, U.S. businesses took on another 261,000 workers, beating analysts’ estimate of 200,000 but also booking the lowest monthly pace of hiring since December 2020.
The number of jobs created over the last three months averaged 289,000, compared to 539,000 in the same period last year. So far this year, the economy has averaged 407,00 new hires a month against 562,000 through the same time in 2021.
Wages edged up 0.4 percent in October compared to September, when pay rose 0.3 percent. However, on an annual basis, pay grew by 4.7 percent against 5.5 percent in September.
Unemployment ticked up to 3.7 percent from 3.5 percent in September, due in part to tech firms cutting staff.
Slower growth in wages would help cool inflation but leave households less able to keep up with rising costs, while a continued strong jobs market presses inflation higher.
The labor force participation rate—the number of adults working or actively looking for a job—remained essentially unchanged at 62.2 percent.
The jobs market remains “overheated,” U.S. Federal Reserve chair Jerome Powell said in a press briefing last week, and added that he “does not see the case for real softening” of the Fed’s aggressive rate-boosting policy.
The new report “keeps a 75-basis-point [interest rate] hike on the table for December,” Jeffries economist Thomas Simons wrote in a research note.
“We do not see how the Fed can look at this data and think that they are making meaningful progress toward getting inflation under control,” he said. “Payroll growth is slowing and wage growth is decelerating but neither one is slowing fast enough.”
After the jobs report was released, speculators in interest rates priced in a 51.5-percent chance the Fed will impose another three-quarter-point rate hike next month and a 48.5-percent chance of a half-point bump.
TREND FORECAST: Prices are rising faster than wages and the Fed has been powerless to make a swift or dramatic impact.
The Fed’s rate hikes have torpedoed the housing industry and vehicle purchases, as we reported in “Mortgage Rates Rise to 20-Year Highs as Home Prices Fall at Record Pace” (18 Oct 2022) and “Average New-Car Payment Hits New High” (12 Jul 2022). As those sectors weaken, that will have a ripple effect through the economy, but it will take time for the impact to work its way through other industries.
Meanwhile, consumers will continue to keep spending as they drain their savings and pile on credit card debt, as we detailed in “Americans Drain Their Savings to Keep Spending” (12 Oct 2022) and “Consumer Debt Soars” (13 Jul 2021). Eventually, they will be forced to put away their plastic and close their wallets.
When consumers are tapped out, the economy will sink into a recession.
At this point, that is most likely to happen in the first quarter of 2023. And we forecast the Fed will begin to lower rates later next year to boost the economy and equity markets prior to the 2024 U.S. Presidential Reality race for the White House.