Live updates on unemployment, the stock market
- Unemployment rose from 3.5 percent to 3.7 percent, the Ministry of Labor said on Friday.
- Economists had estimated that 190,000 jobs were added last month.
- Employers added 261,000 jobs despite high inflation, rising interest rates and growing fears of a recession.
Hiring remained strong in October as employers added 261,000 jobs despite high inflation, rising interest rates and growing fears of a recession.
Unemployment rose from 3.5 percent to 3.7 percent, the Ministry of Labor said on Friday.
Economists had estimated that 1[ads1]90,000 jobs were added last month. The actual gain was the smallest since December 2020.
In yet another sign of a vibrant labor market, job gains for August and September were revised up by a net 29,000, with September’s gain now at 315,000, up from 263,000.
In recent months, job growth has slowed from a robust average monthly pace of more than 400,000 for most of this year to around 290,000 in the past three months, but remained robust. Persistent labor shortages have led companies to avoid layoffs due to fears they won’t be able to fill openings when the economy bounces back.
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Initial jobless claims, a measure of layoffs, were a historic low of 217,000 last week.
Health care led October’s job gain with 53,000. Professional and business services added 39,000; leisure and hospitality, 35,000, with hotels accounting for the bulk of the new positions; and production, 32,000.
Federal, state and local governments added 28,000 jobs.
“The economy appears to be on a steady keel in this jobs report,” said Jane Oates, president of WorkingNation, a nonprofit that raises awareness of the challenges facing American workers and former head of the Labor Department’s Employment and Training Division.
Stocks react to jobs report
Shares move higher after the better-than-expected jobs report. The Dow Jones Industrial Average was up 1.3% at 10:14 a.m. ET. The S&P 500 and Nasdaq also rose by more than 1%.
This comes on the heels of Wednesday’s increased volatility as a result of the Fed’s decision to raise interest rates by a further 75 basis points. Meanwhile, the Dow experienced its best October ever with a 14% gain. It was also the best month since 1976.
What is labor force participation?
In a hint that worker shortages may persist, the share of adults working or looking for work fell to 62.2%, well below the pre-pandemic level of 63.4%. The labor force participation rate had generally been rising since 2020 as workers returned to a warm labor market after taking care of children or remaining unemployed due to fears of covid-19.
But that share has roughly held steady this year, signaling that most Americans who want to return to the workforce have done so. That could maintain upward pressure on wages as employers scramble for a more limited pool of workers.
Last month, average hourly wages rose 12 cents to $32.58, slowing the annual increase from 5% in August to a still healthy 4.7%.
The prospect of continued labor shortages and increased wage growth is likely to mean more hefty rate hikes from a Federal Reserve determined to tame inflation that remains just below a 40-year high of 8.2%, economists say.
“This report is a green light for more Fed rate hikes and higher interest rates,” said Jason Schenker, president of Prestige Economics.
Are we in a recession right now?
The Fed’s moves are expected to increasingly discourage lending and economic activity, and top economists are now predicting a recession in 2023. As a result, many companies are scaling back hiring plans.
Identity, a 33-employee marketing and PR firm based in Birmingham, Michigan, has added three employees this year, and with a 10% increase in sales, should hire a couple more.
But company president Mark Winter is being cautious.
“We haven’t seen a slowdown in business demand, but we know it’s coming,” says Winter.
So instead of expanding his full-time workforce, Winter relies more on freelancers for web development, writing, media relations and social media projects “to make sure we have more flexibility.”
Workers are also getting nervous about a looming recession. Job candidates on LinkedIn are sending out an average of 18% more applications than they did a year ago, in a sign that landing a position is getting tougher, according to the professional networking platform. Linkedin posts mentioning “layoffs” or downsizing are also up 17.9% compared to last year.
Is there still a labor shortage?
At the same time, the labor shortage has prompted companies to add holiday workers early this season, a development that would likely boost job growth in October, said Goldman Sachs economist Spencer Hill.
The number of job vacancies increased from 10.4 million to 10.7 million in September after falling from record levels in previous months. There are still nearly two job openings for every unemployed adult in the United States
Nevertheless, there is little doubt that a decline is coming, say economists. Many companies that replace existing workers who quit are likely to stop doing so in the coming months, Morgan Stanley says. That “could lead to a faster-than-normal collapse in job growth,” the research firm says.
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Instead of filling any jobs, Winter says he’s turning to freelancers.
Early next year, job growth will probably stop, says economist Nancy Vanden Houten from Oxford Economics. Mark Zandi in Moody’s Analytics expects such a shutdown to occur in the second quarter.
“Our conversations with managers indicate that demand for employment will weaken visibly in the coming months as companies face weaker domestic and international sales, continued cost pressures and tighter financing conditions,” Ey-Parthenon wrote in a note to clients.
That would be worrisome for job seekers, but welcome news for a Fed looking for a slowdown in employment and wage growth to determine whether inflation is cooling enough to halt its aggressive rate hike campaign. This week, the Fed approved its fourth straight rate hike in three quarters.
Stay tuned for live coverage:
Terminations on Twitter
Twitter is expected to announce massive layoffs today, according to multiple reports. This comes after Elon Musk took over Twitter and became CEO. About 3,750 workers are expected to be affected by layoffs, half of the current workforce, according to The Verge.
Amazon and Apple shares
Both Amazon and Apple announced hiring breaks yesterday. Amazon’s hiring break is for all corporate roles, while Apple’s is only for jobs outside of research and development.
Apple and Amazon shares both rose around 10:15 a.m. ET.
Termination news
Although the job market is relatively strong right now, there are some cracks. Technology companies in particular are experiencing challenges. On Thursday, Lyft and payment processing company Stripe announced plans to cut 13% and 14% of their workforces, respectively, CNBC reported.
Labor productivity:Can a boost to it fix high inflation, weak growth and labor shortages?
Work from home:Could refusing to return to the office mean a layoff? The changing tides of the job market can change the rules.
Why is the job report so important?
One of the reasons the jobs report is so important is because the Federal Reserve factors it heavily into its decisions on interest rates. Since the labor market is quite strong despite the growing prospect of a recession, the Fed is able to raise interest rates in an attempt to bring down inflation without worrying that it will lead to an increase in unemployment. But that could change as the central bank imposes more rate hikes.
What does the job report show?
The jobs report is one of the best indicators of the state of the labor market. Besides the overall unemployment rate, the report is a gold mine of data for economists, investors and decision makers. It indicates how many people stopped looking for work or stopped working, how much workers across a wide range of industries earn and where hiring occurs most, among other things.
When is the next job report?
The next jobs report comes out on Friday 2. December. It will cover employment trends in November.
The Vix
The Cboe Volatility Index, or VIX, a market indicator of expected volatility over the next 30 days, has dipped slightly since the jobs report. It recently hit a near 6-week low, indicating that investors are less uncertain about the market outlook.
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Elisabeth Buchwald is a personal economics and markets correspondent for USA TODAY. You can ffollow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here