The BLS jobs report for October shows a labor market that remains quite strong but is cooling from the torrid pace of growth reported for September.
Payrolls grew by 150,000, which is somewhat below what economists were expecting. Private sector jobs grew by only 100,000. The auto strike reduced this growth by 33,000. While health care continued to create lots of jobs (58,000), most other sectors showed either moderate (professional services, leisure/hospitality) or no growth (retail). Even without the auto strike, manufacturing would have been flat. And earlier estimates of job growth in August and September were revised downward by about 100,000.
Very importantly, wage growth was moderate – wages rose last month by 2.5% (on an annualized basis) and 3.2% over two months.
The household survey also showed moderation. The unemployment rate rose just a bit, from 3.8 to 3.9 percent, and labor force participation also dropped slightly. That means the rate of employment in the population fell .2 percentage points to 60.2.
The moderation of the labor market, and especially of wage growth, also comes at a time of strong recent productivity growth. In a report published earlier this week, productivity grew over 4 percent in the past 6 months, and nearly 2.5 percent over the preceding year (after weak or negative growth in late 2021 and early 2022) . That means that wages can grow by comparable amounts above the inflation rate without adding more to rising prices.
The moderation of the job market, in combination with a good productivity report, should relieve the Fed’s concerns about an overheated economy and labor market after the blockbuster report of September, which now looks more like a blip. I see little reason for the Fed to bump up interest rates in December, given these numbers.
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