US hiring remained strong in October, though the national unemployment rate ticked higher than expected in a trend that could affirm the Federal Reserve’s move toward smaller interest rate hikes at a pivotal meeting next month.
Employers hired at a robust clip, adding a higher-than-expected 261,000 jobs last month, according to Labor Department data. Prior to the announcement, economists had expected employers to add 205,000 jobs.
The US unemployment rate ticked upward to 3.7% — worse than the 3.5% rate economists projected. However, the rate is still hovering near a five-decade low.
Average hourly wages increased by 4.7% compared to the same month one year earlier. The uptick was slightly less than in September, when wages climbed 5% year-over-year.
“The bottom line here is that the labor market is softening, but has not yet reached the point where the data are screaming at the Fed to stop tightening,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
While hiring was stronger than expected last month, it was the smallest number of job gains since December 2020.
A red-hot labor market has complicated the Fed’s effort to bring down decades-high inflation with a series of sharp interest rate hikes. Prominent officials, including Fed Chair Jerome Powell, have warned that unemployment is likely to rise higher as the central bank tightens its benchmark interest rate in an effort to cool an overheated economy.
Earlier this week, the Fed signaled it could slow the pace of its interest rate hikes following four straight super-charged increases — though Powell warned that tightening would continue into next year.
Powell also acknowledged that ongoing strength in the job market was contributing to inflation, with employers hiking wages to lure new workers during a labor shortage.
The pace of job gains has slowed in recent months. US employers have added an average of 289,000 jobs over the last three months — a slowdown compared to the monthly rate of 539,000 one year ago.
Additionally, layoffs have accelerated in many corners of the economy as recession fears mount. Twitter and Lyft joined a spate of other firms by launching a round of job cuts on Friday. Other companies, including Amazon, have announced hiring freezes while they assess deteriorating economic conditions.
The October jobs report was another key indicator on the health of the US economy ahead of critical midterm elections that will determine which party controls Congress.
The Fed will receive another key data point next week when the Consumer Price Index for October is released. Inflation ran at 8.2% in September.
With Post wires