October Employment: Less Need to Squint to See Jobs Market Cooling

Source: Economics Group of Wells Fargo Bank, N.A. Summary The jobs market looks to be softening after all. Employers added 150K new jobs in October after an eye-popping (and downwardly revised) 297K gain in September. Admittedly, the headline gain in October would have been even stronger were it not for a 33K decline in motor vehicle and parts manufacturing that reflected the recent UAW strikes. However, with payrolls rising at an average of 204K over the past three months, the trend in hiring has moderated from the 300K+ pace registered earlier this year. Further pointing to the labor market cooling off was an increase in the unemployment rate to nearly a two-year high of 3.9%. Unlike the upward creep in recent months, which was driven by solid supply growth in the labor supply, October’s rise in the jobless rate was due to a noticeable decline in the household measure of employment and rising ranks of unemployed workers. Slower growth in average hourly earnings—the 0.2% monthly gain brought the three-month annualized rate to just 3.2%—also suggests the demand and supply of workers are coming back into balance and easing upward pressure on inflation. We believe the FOMC will view today’s employment report as another step along the long road back to 2% inflation. Decelerating employment and wages point toward a further easing of inflationary pressures as the calendar turns to 2024. There are still two more CPI reports and one more employment report before the next FOMC meeting on December 12-13, but today’s data reinforce our view that the last rate hike of this tightening cycle is behind us. Job Growth Sputtered in October The softening trend in the labor market was evident in the October employment report. Nonfarm payrolls rose 150K last month compared to consensus expectations of a 180K increase. READ FULL ARTICLE >>