Job creation slowed in the United States in October, but the unemployment rate remains low and job creation is robust. The pace in September, when around 300,000 jobs were created, was unsustainable and a slowdown was expected. The US economy grew at its fastest rate since 2021 in the third quarter, but economists’ forecasts warn of an impending slowdown.
According to data released this Friday by the Bureau of Labor Statistics, the world’s leading economy added 150,000 jobs in the month of October, less than the 180,000 expected by analysts. This figure is due to the strike by the Detroit auto companies, General Motors, Ford and Stellantis (which was taken over by Chrysler), which brought almost 50,000 workers on strike. “Employment increased in health care, public administration and social services. In the manufacturing sector, the number fell due to strikes,” said the statement, which said: “Employment in the manufacturing sector fell by 35,000 in October, reflecting a decline of 33,000 jobs in the motor vehicle sector and its components, which largely due to the strikes.”
For its part, the unemployment rate was 3.9%, compared to 3.8% in September. It has been below 4% for 21 months, the best increase in 60 years. Data for August was revised downwards, from 227,000 to 165,000 jobs, and for September, from 336,000 to 197,000, exacerbating the slowdown.
Unemployment in the United States is measured by two different statistics. A survey of companies allows us to calculate non-agricultural job creation, the data most followed by the market. Another parallel household survey measures the active and working population, the number of unemployed and thus the unemployment rate.
The slowdown in job creation is good news for Federal Reserve Chairman Jay Powell, who has been trying for more than a year to engineer a soft landing for the U.S. economy. The disinflation process is consistent with a very low unemployment rate and a 30-month streak of uninterrupted job creation for now, but the central bank wants to see signs of further slowdown so as not to raise interest rates further.
Good news for Powell is that the workforce has increased, which has eased some pressure on wages. “The labor market remains tight, but supply and demand conditions continue to improve,” said the President of the Federal Reserve this Wednesday. “The strong job creation has been accompanied by an increase in labor supply: the participation rate has increased since the end of last year, particularly for those aged 25 to 54, and immigration has reached levels seen earlier during the pandemic. Nominal wage growth has shown some signs of moderation and job vacancies have fallen so far this year. Although the gap between employment and labor has narrowed, the demand for labor continues to exceed the supply of available labor,” he added.
In October, average hourly wages for nonfarm private sector workers rose 7 cents, or 0.2%, to $34.00. Over the past 12 months, average hourly wages have increased 4.1%, up from 4.3% the previous month, more good news for Powell. “The salary increases, as I said, are decreasing, but they are decreasing gradually. “I think that’s what we want to see, that this whole series of trials continue,” he said Wednesday.
Wages are regaining purchasing power, but at the same time there is a risk that demand will increase and inflation will become more entrenched. The big increases that auto workers achieved after their historic strike have paved the way for demands at other companies. Toyota, for example, agreed to a 9% increase in its own workers’ salaries despite not going on strike. These increases will be reflected in the statistics in the coming months and it remains to be seen what weight they will have overall.
It is premature to assume that the October data will be used to determine what the Federal Reserve will do at its next policy meeting, scheduled for mid-December. There are still a few weeks ahead of us and a lot of data still needs to be published. “We will go into the December session with two more inflation data, two more labor market data, some economic activity data and also the general state of financial conditions and the general global situation, we will see all of these things as we make a decision in December . “We have not made this decision,” he warned. In any case, if the labor market slowdown consolidates, data like this would suggest that the Federal Reserve could go ahead without raising rates in December for the third consecutive month.
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