US job growth hits lowest in almost two years in October, unemployment rises

  • Nonfarm payrolls projected to increase by 200,000
  • Unemployment rate rises from 3.5% to 3.6%
  • Average hourly earnings expected to rise 0.3%

WASHINGTON (Reuters) – U.S. employers likely cut jobs in October for the first time in almost two years and increased wages at a modest pace. That suggests that labor market conditions have eased somewhat, and the Federal Reserve may shift to lessening rate hikes from December.

Friday’s jobs report, which the Labor Department is closely watching, also expects the unemployment rate to rise to 3.6% from 3.5% in September. The Fed on Wednesday announced another 75 basis point rate hike and said further increases in borrowing costs would be needed to fight inflation.

But central banks have suggested we may be approaching an inflection point in what has been the most rapid monetary policy tightening in 40 years.

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

in San Francisco. “The Fed will try to stick a needle in the needle that slows the labor market enough to put downward pressure on wages and inflation without triggering a recession.”

Nonfarm payrolls likely increased by 200,000 last month, after adding 263,000 in September, according to a Reuters poll of economists. This would be his smallest increase since December 2020, when his salary was cut in the onslaught of COVID-19 infections. Estimates he ranged from 120,000 to 300,000.

Employment growth was probably more evenly distributed across industry sectors, in line with recent patterns, with the leisure and hospitality sector leading the way. Leisure and hospitality employment is at least 1 million below pre-pandemic levels. Interest rate-sensitive industries such as financial activities, transportation and warehousing will likely cut jobs as they did in September. Government salaries are expected to fall further.

Hurricane Ian is expected to have a slight hit to labor costs. A storm hit Florida in late September, pushing up unemployment claims in mid-October when the government investigated businesses for last month’s jobs report.

“Hurricane Ian should have at least some negative impact on nonfarm employment,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. “Assuming at least some workers were laid off in the areas hardest hit by the hurricane, we lowered our forecast slightly to show an increase of 150,000 (from 200,000).”

Backfill position

Job growth has been solid, but domestic demand has softened as borrowing costs rise as companies replace workers who would otherwise retire. But with the risk of recession rising, the practice could end soon. A survey by the Supply Management Institute on Thursday found that some service sector firms are “holding off from backfilling positions” due to uncertain economic conditions.

Nevertheless, the labor market remains tight, with 1.9 vacancies per unemployed at the end of September.

Average hourly wages are forecast to increase by 0.3%, matching September’s increase. However, there is a risk of an unexpected rise due to Hurricane His Ian or calendar anomalies. According to Crandall of his at Wrightson ICAP, hourly wage reporting levels can artificially rise when storms or other events keep people from going to work during payroll week.

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

“The week of the payroll survey included the 15th day of the month, and it is likely that wage increases were guaranteed by workers being paid mid-month and at the end of the month rather than every other week, so the monthly/monthly It tends to bias change higher, said Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut.

Barring distortions from weather and calendar quirks, wage growth is slowing. Average hourly earnings are projected to rise 4.7% year-on-year in October after he rose 5.0% in September. Other wage indicators are also boiling, which bodes well for inflation.

“We believe wage growth has peaked,” said Michelle Green, chief economist at Prevedia in Columbus, Ohio. but its growth rate is actually starting to slow.”

Reported by Lucia Mutikani.Edited by Cynthia Osterman

Our standards: Thomson Reuters Trust Principles.

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