US employment remained strong; unemployment rose to 3.7%

Although the pace of labor market activity has slowed, it has been gradual and the report puts the Fed on track to raise interest rates by at least 50 bps in December.

Michael Feroli, an economist at JP Morgan.

US employers hired more workers than expected in October, but the rise in the unemployment rate to 3.7% suggests some easing in labor market conditions, which would allow the Federal Reserve (Fed) to move to smaller hikes than expected. interest rates from December.

Nonfarm payroll jobs increased by 261,000 last month, the Labor Department report showed. September data was revised upwards to show 315,000 jobs added, instead of the 263,000 previously accounted for.

Economists polled by Reuters had forecast a growth of 200,000 jobs.

The unemployment rate rose to 3.7% from 3.5% in September. Median hourly earnings increased 0.4% vs. 0.3%; however, they were likely prompted by a calendar quirk.

Wages rose 4.7% annually in October after 5% in the previous month, as last year’s big hikes fell out of the calculation. Other wage measures have also been reduced, which bodes well for inflation.

The Fed announced another 75 basis point rate hike last week, saying its fight against inflation will require higher borrowing costs but may be approaching a tipping point of faster monetary policy tightening. in 40 years.

“Job creation rose more than expected and, despite the fact that it increased, the unemployment rate remains close to its pre-pandemic levels, which continue to be the lowest in the last five years,” Rubeela detailed in a note. Farooqi, economist for the United States of the firm HFE.

However, while the market still shows no real tightening in response to rapid monetary tightening, Farooqi said there are signs of a slowdown in the labor market, as the activity rate fell and the average hourly wage fell.

Job growth has remained strong even as domestic demand has softened amid higher borrowing costs as companies replace departed workers.

However, with recession risks rising, the practice could end soon. A survey by the Institute of Management and Supply in the United States revealed that some companies in the service sector postpone the filling of vacant positions due to uncertainty about the economic situation.

Even so, the labor market is very tight with 1.9 jobs for every unemployed person at the end of September.

The overall increase in hiring was led by healthcare, which added 53,000 jobs. Professional and technical services payrolls increased by 43,000 jobs.

Employment in the manufacturing industry increased by 32,000 vacancies, while leisure and hospitality added 35,000 positions, however, this sector is still 1.1 million positions below the pre-pandemic level.

The payrolls of the public administrations rebounded by 28,000 positions. Sectors sensitive to interest rates, such as financial activities and retail trade, registered a moderate increase in employment.

Construction payrolls barely increased, while transportation and warehousing added 8,000 places.