Hiring Pace in US Slows Amidst Rising Interest Rates

by Madison Thomas
October job growth

In October, United States hiring exhibited a notable deceleration, with the economy generating 150,000 new jobs. This slowdown suggests a labor market that, while slower, is holding strong even as businesses and consumers grapple with the increased cost of borrowing due to heightened interest rates.

The employment increase in October, although substantially lower than September’s vigorous 297,000 jobs added, was still sufficient to indicate an ongoing demand for labor, signifying an economy with sustained vigor.

The decline in job growth for October could have been less pronounced if not for the recently resolved strikes by the United Auto Workers at the major Detroit automakers. Economists estimate that these strikes reduced job growth for the month by approximately 30,000. The strikes concluded with preliminary agreements that saw the workers gain improved wages and benefits.

A slight uptick in the unemployment rate was observed in October, rising to 3.9% from the previous 3.8%. Additionally, there has been a downward revision of job growth figures for August and September, with a combined reduction of 101,000.

Manufacturing jobs felt the impact of the UAW strikes with a decrease of 35,000 positions in October. Conversely, other sectors showed healthy employment gains, with the healthcare sector adding 58,000 jobs, government agencies 51,000, and construction firms 23,000.

Wage growth has seen a deceleration, with a modest increase of 0.2% over September and a 4.1% year-on-year rise. These figures represent the smallest gains since June 2021 on an annual basis and since February 2022 on a monthly basis.

The recent employment report is closely analyzed by the Federal Reserve in the context of its interest rate decisions. The Fed, which has left its key interest rate unchanged recently, may see the slower wage and job growth as signs of subsiding inflationary pressures, potentially diminishing the need for further rate hikes.

Since March 2022, the Fed has increased its benchmark rate 11 times as a measure against inflation, which, while down from last year’s peak, still exceeds the Fed’s 2% preferred rate.

Despite the increase in borrowing costs, the labor market remains stable, contributing to robust consumer spending. On average, 204,000 jobs have been added monthly over the past quarter.

However, October saw a reduction of 201,000 in the labor force, marking the first decline since April. This could present challenges for the Fed as the influx of labor over the past year has alleviated wage-induced inflation.

Federal policymakers are tasked with the delicate balance of dampening inflation, supporting employment, and avoiding a recession. Counter to some expectations of recession due to rising rates, the US economy expanded at a 4.9% annual rate in the third quarter.

Hiring intentions remain high among US companies. Data from September showed 9.6 million job vacancies, signifying a strong labor demand despite a reduction from March’s historical high.

This robust employment situation, paired with slowing inflation, fuels optimism that the Fed might achieve a “soft landing,” successfully moderating inflation without inducing a recession.

Economist Andrew Hunter from Capital Economics interprets the modest October job gains and slowing wage increases as indicators that the economy’s third-quarter strength might not persist into the fourth quarter, making further rate hikes by the Fed increasingly improbable.

Frequently Asked Questions (FAQs) about October job growth

How many jobs were added to the US economy in October?

In October, the US economy saw an addition of 150,000 jobs, indicating a slowdown in hiring activity.

Did the UAW strikes affect the October job growth numbers?

Yes, the strikes by the United Auto Workers against Detroit automakers had a significant impact, likely reducing the job growth for the month by about 30,000.

What was the unemployment rate in the US for October?

The unemployment rate in the US for October experienced a slight increase, rising to 3.9% from the previous rate of 3.8%.

How have wage pressures in the US changed in October?

Wage pressures have eased, with average hourly pay rising 0.2% from September to October and showing a 4.1% increase from the same month a year prior, marking the lowest year-over-year wage increase since June 2021.

What impact might the October job report have on the Federal Reserve’s policy?

The October job report, revealing slower wage growth and a reduction in job gains, could influence the Federal Reserve to consider whether further interest rate hikes are necessary, as these factors suggest that inflation pressures may be diminishing.

Has there been a change in the labor force participation in October?

Yes, there was a decline of 201,000 in the labor force participation in October, marking the first drop since April.

What are the implications of the current job market conditions for the US economy?

The current job market conditions, characterized by stable hiring and cooling inflation, raise hopes that the Federal Reserve may achieve a soft landing by raising interest rates enough to control inflation without causing a recession.

More about October job growth

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JennaB November 3, 2023 - 3:41 pm

interesting how the Fed’s gonna take this news Wage growth slowing too could mean less pressure to raise rates?

EconGuy87 November 4, 2023 - 5:39 am

solid overview of the jobs data but let’s not forget the bigger picture here still lots of jobs open despite the hiring cooldown

SallyQ November 4, 2023 - 8:34 am

jobs report is one thing but what about the real economy folks still feeling the pinch with these prices

GaryWrites November 4, 2023 - 8:54 am

Didn’t catch this earlier the labor force actually shrank in October Thats kinda concerning no?

Mike T November 4, 2023 - 12:25 pm

so we’re seeing a slowdown in hiring last month didn’t expect that with the way things were going strikes really do a number on the industry huh


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