The US economy added 150,000 jobs in October, proving that September’s blowout payroll gains were only temporary as the Federal Reserve hedges on one more interest rate hike by the end of the year.
October’s payroll gain was slightly below the 157,000 job gains economists expected — though September’s additional 336,000 jobs were nearly double economists’ predictions, according to fresh data released by the Bureau of Labor Statistics on Friday.
The labor force participation rate was unchanged at 62.7%, and the Labor Department also reported that the US average hourly wages rose 0.2% in October compared to the previous month.
Wages were also up 4.1% compared to a year ago, to $34 — slower than last year, but well ahead of their pre-pandemic pace.
Payroll in September and August was revised down by 39,000 and 62,000, respectively.
With these revisions, employment over the past two months combined is 101,000 lower than previously reported, the federal agency said.
The report also showed that the unemployment rate rose to 3.9% — slightly above the 3.8% rate that held steady in August and September, which had ticked higher from 3.5% in July.
According to Bloomberg economists, the increase signals a greater likelihood of a recession by year-end, based on historical data.
Despite that, stocks climbed Friday and had their best week of 2023 as investors grew hopeful the Fed was done with its rate-hiking campaign. The Nasdaq finished the week with a gain of 6.6%, while the Dow and S&P 500 both advanced more than 5%.
Fed officials have said that they are no longer forecasting a recession, and have been keeping tabs on data points such as the jobs report and Consumer Price Index — a closely-watched measure of inflation that tracks changes in the costs of everyday goods and services — are important in central bankers’ decision to hike interest rates.
Strong hiring can often fuel inflation if companies feel compelled to raise pay to attract and keep workers, making it more difficult for the Fed to reach its 2% inflation target without pushing the benchmark federal funds rate beyond its current 22-year high, between 5.25% and 5.5%.
Thus, the latest sign that the pace of hiring is losing some momentum — without going into a nosedive — would no doubt be welcomed by the Fed.
On Wednesday, Fed officials decided to hold interest rates steady for the second consecutive meeting, and noted in a statement following the announcement that job gains “have moderated since earlier in the year but remain strong.”
The Fed is hoping to achieve a rare “soft landing,” in which it would manage to slow hiring and growth enough to cool price increases without tipping the world’s largest economy into a recession.
Optimism that this can happen has been growing since inflation has dropped from its 9.1% peak in June 2022.
The CPI rose 3.7% year-over-year in September and August, with much of the advance in both months attributed to pressure from gasoline prices.
Gasoline experienced an eye-watering 10.6% increase in August and another 2.1% advance in September, when AAA figures showed that the average price for a gallon of gas was $3.85.
As of Friday, a gallon of gas in the US averages $3.44, according to AAA.
The Bureau of Labor Statistics is set to release October’s CPI report on Nov. 14.
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