Employment rose by 150,000 in October, according to the latest Employment Situation Summary from the U.S. Bureau of Labor Statistics (BLS), a slowdown from the strong September surge and the 258,000 monthly average of the previous 12 months.
October’s job growth was seen across several industries, primarily driven by health care, government and social assistance, according to BLS. Manufacturing jobs dipped because of the United Auto Workers strike.
The unemployment rate changed little in October at 3.9% and the number of unemployed people in the country remained relatively the same at roughly 6.5 million. The unemployment rate has ranged from 3.4% to 3.9% since March 2022, according to the BLS. Average hourly earnings for private employees rose by 4.1% in the last year, a slight tick down from 4.2% last month. Although hourly wage growth remains elevated, it has cooled.
“The October employment report sends a clear signal that the labor market is cooling,” The National Association of Federally-Insured Credit Unions (NAFCU) Chief Economist Curt Long said in a statement. “A broad range of measures fell during the month, including employment, labor force participation, and wage growth.
“Furthermore, there were substantial downward revisions to prior month job gains,” Long continued. “NAFCU continues to believe that Fed hikes are finished during this cycle, but a couple more reports like this one will have the FOMC considering a rate cut as early as Q1.”
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Report shows Fed policy working
The October report is one of several economic indicators the Federal Reserve will consider when it meets again in December to discuss its monetary policy. Policymakers voted to leave their benchmark rate unchanged at its November meeting for a second straight time to assess the cumulative impact of previous increases. October’s lukewarm jobs reading could make the case for the central bank to hold off on raising interest rates when it meets again in December.
“The labor market is cooling but isn’t cold,” Jim Baird, Plante Moran Financial Advisors’ chief investment officer said in a statement. “It appears that the slowdown in job creation and gradual uptrend in the jobless rate could provide sufficient cover for the Fed to stand pat for now, so long as underlying inflation pressures also continue to abate.”
The progress on slowing inflation has been solid, but monthly readings still trended higher in August and September. Meanwhile, gross domestic product (GDP) in the third quarter of 2023 increased at more than twice the rate of growth in the previous quarter despite the Fed’s efforts to slow the economy and lower soaring inflation.
“The tug of war between consumer spending as the primary driver of growth and the Fed’s attempts to cool demand continues to go back and forth,” Baird said. “The GDP report was a win for consumers, but recent labor market trends point toward meaningful progress by the Fed’s tightening efforts and slower growth ahead.”
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Jobs report a win for housing
Construction hiring increased for the seventh consecutive month, and the sector has added 148,000 jobs so far this year, which reflects the uptick in new homes being built as the existing housing supply remains subdued, according to the Mortgage Bankers Association VP and Deputy Chief Economist Joel Kan.
“Low levels of pre-owned housing inventory have pushed prospective buyers to new homes, increasing the need for workers, while owners staying in their current homes continue to invest in home improvement projects and repairs,” Kan said in a statement. “A strong job market is nevertheless supportive of the housing market, both in terms of home buying and mortgage performance.”
Mortgage rates dipped slightly the week ending Nov. 2 but are still near the 8% threshold, pushing the cost of purchasing the typical for-sale home up an additional 7.4% in October compared to one year ago, according to Realtor.com Chief Economist Danielle Hale. This leaves many would-be homebuyers sidelined.
“It is likely that many of October’s new workers will choose to rent instead of buy their next home as the monthly costs of buying a starter home are lower than renting in just 3 of the 50 major metro markets and recent rent declines are likely to continue as rising rental vacancy shifts market balance between renters and landlords,” Hale said. “Households trying to evaluate their options will want to look not only at today’s costs, but costs over time to determine which choice is likely to offer the best financial return.”
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