The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.
As the weather cools, the job market is following. Today’s jobs report from the Bureau of Labor Statistics shows employers added 261,000 jobs, down from 315,000 jobs added in September and the lowest level since December 2020. The unemployment rate rose to 3.7 percent accompanied by weakening labor force participation. Over the last few months, the job market has consistently signaled that it is cooling. A gradually slowing job market means that a soft landing is still on the table, but all eyes are on whether inflation will fall.
Payroll Growth Slows Again, Lowest Since December 2020
Employers added 261,000 jobs in October, beating expectations but reaching the lowest level of jobs growth since December 2020. Job gains are still beating out pre-pandemic averages. In 2019, on average, 164,000 jobs were added monthly and that was regarded as a tight labor market. There’s still room for jobs growth to cool before red flags are raised about the health of the labor market.
The strongest job gains in October were in health care & social assistance (+71,100) and leisure & hospitality (+35,000 jobs added). State & local government education added 11,700 jobs, boosting government jobs; however, this is more likely due to difficulty seasonally adjusting data around the start of the school year. With the holiday season coming, retail (+7,200) and transportation & warehousing (+8,200) continued to add jobs even as retailers are cautious about holiday spending amid a slowing economy.
Unemployment Rate Jumped to 3.7 Percent
The unemployment rate rose to 3.7 percent, married with a second consecutive decrease in the labor force participation rate. The jump in the unemployment rate is not yet raising a red flag. The unemployment rate is still near historic lows, but the weakening labor force participation rate is pushing the labor market in the wrong direction as the Fed tries to cool the job market while keeping Americans employed. However, if the increase in the unemployment rate becomes more sustained, that would be a canary in the coal mine for the health of the labor market.
Wage Growth Drops Below 5 Percent for the First Time in 2022
Average hourly earnings grew 4.7 percent in October, down from 5.0 percent in September, falling below the 5.0 percent threshold for the first time this year. Cooling demand for workers and declining turnover are tamping down wage growth. The Federal Reserve is watching for wage growth to cool, but ultimately, cooling wage growth is only important inasmuch as we see lower inflation as a result.
Conclusion
Today’s jobs report is consistent with a soft landing as the job market slows but doesn’t slow too much. The strong payroll survey but weak household survey means this isn’t an ideal report for the Fed, but the story is still of a cooling labor market. Right now, the Fed is trying to land the economy while grappling with an updraft from the hot labor market. While the strong labor market helps prevent the economy from slamming into the ground, eventually the economy could run out of runway. With the risk of recession on the horizon, a soft landing is still possible but it’s growing increasingly difficult.
More Insights
Job gains are still running fairly hot. Employers added 261,000 jobs in October, the slowest pace since December 2020, but still faster than expectations and faster than the pre-pandemic average from 2019 of 164,000 monthly jobs added.
Job gains were still broad-based in October with most major industries adding jobs. It was surprising to see construction add 1,000 jobs despite the slowdown in the housing market.
Also interesting: health care & social assistance added 71,100 jobs. In the September JOLTS report released earlier this week, this industry reached a new record high in job openings.
We saw a small jobs bump in state & local government education (+11,700) in October after a drop in September (-17,100). However, this oscillation is likely due to difficulty seasonally adjusting education payroll data around the start of the school year, especially as the pandemic has changed the education sector's hiring patterns.
Even though transportation & warehousing overall added 8,200 jobs, there is divergence in the details. Warehousing & storage lost 20,000 while truck transportation added 13,200. The decline in warehousing & storage employment is part of a broader decline over the last few months which could be due to the slowing economy, a retrenchment in pandemic-driven e-commerce growth and consumer demand concerns as we head into the holiday season.
Similarly, even though retail added 7,200 jobs seasonally adjusted, on a non-seasonally adjusted basis, holiday hiring is off to a slower start this year compared to 2020 and 2021. Retail hiring is still not bad by historical standards, but this may be a sign retailers are more cautious about consumer demand heading into the holiday season.
Wage growth is cooling. Average hourly earnings grew 4.7 percent year-over-year in October, solidly below 5.0 percent for the first time in 2022, as cooling demand for workers and declining turnover start to tamp down wage growth.
The establishment survey (the charts above) was hotter than expectations, but the household survey was weaker. The unemployment rate jumped back to 3.7 percent. A one-month increase is not a red flag, especially while still near historical lows, but it is still a proverbial canary to watch in coming months.
That's especially true in the context of weakening labor force participation. Both labor force participation and prime-age labor force participation were down for the second consecutive month. This is not the slowdown the Fed is looking for—they would much rather see moderating wage growth due to rising labor force participation.
The unemployment rate ticked up across racial/ethnic groups in October. Just like a rising tide can lift all boats, the opposite can be true too.
Employee absences due to illness ticked up slightly, still clearly elevated compared to pre-pandemic.
