Steve Moore, senior economist at FreedomWorks, shares economic insights in Making Money.
All eyes will be on October’s jobs report when it is released Friday morning as investors look for clues about the health of the labor market amid higher interest rates and stubborn inflation.
The Labor Department’s high-profile October payroll report, due at 8:30 a.m. ET, is expected to show that hiring rose by 180,000 last month and that the unemployment rate was at 3.8, according to a median estimate from Refinitiv economists % remained.
That would be down from September’s gain of 336,000 and the monthly average of 271,000 over the previous 12 months. However, it is slightly above the average monthly increase before the pandemic.
WORKERS NOW DEMAND NEARLY $80,000 TO START A NEW JOB
“The October jobs report is likely to show a significant weakening in labor market conditions as private sector hiring declines and wage growth continues to weaken,” said Lydia Boussour, senior economist at EY.
Boussour said she expects service sector employment to decline further in October due to more cautious hiring in both the professional and business services sector and the leisure and hospitality sector. Thanks to the UAW strike against Detroit’s three major automakers, employment in the freight sector is also expected to post its first decline since March.
However, she noted that a likely increase in government hiring – due to the return of teachers at the start of the school year – will help increase the total.
Construction workers are seen at a construction site in Miami on May 5, 2023. (Joe Raedle/Getty Images / Getty Images)
The Federal Reserve is watching the report closely for signs that the labor market is finally weakening after months of surprisingly solid employment gains as policymakers try to get inflation under control. Although the consumer price index has cooled significantly in recent months, it is still well above the Fed’s preferred 2% target despite 11 rate hikes in 16 months.
Slower job growth and a further moderation in wage increases on Friday could be a welcome sign for the Federal Reserve, which on Wednesday kept interest rates steady for a second straight month.
Private sector job growth rises less than expected in October: ADP
Average hourly wages – a key indicator of inflation – are expected to rise 0.3% for the month and are up 4% from the same time a year ago.
| ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| Me: DJI | DOW JONES AVERAGE | 33839.08 | +564.50 | +1.70% |
| I: COMP | NASDAQ COMPOSITE INDEX | 13294.190496 | +232.72 | +1.78% |
| SP500 | S&P 500 | 4317.78 | +79.92 | +1.89% |
“Look for wage growth to moderate,” said Jeffrey Roach, chief economist at LPL Financial. “Markets could become choppy if wages continue to grow faster than inflation.”
The labor market remained historically tight last year, defying economists’ expectations of a slowdown. Although economists say the situation is gradually returning to normal after last year’s rapid pace, a breakthrough is still far from being achieved.
Job seekers visit booths during the Spring Job Fair at the Las Vegas Convention Center in Las Vegas on April 15, 2022. (KM Cannon/Las Vegas Review-Journal / Getty Images)
A separate report released Wednesday showed job vacancies unexpectedly rose to 9.6 million at the end of September, the second straight month of gains. Before the COVID-19 pandemic began in early 2020, the highest number on record was 7.6 million. There are still about 1.5 jobs per unemployed American.
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The data, combined with historically low unemployment claims, suggests the labor market remains resilient despite increasing headwinds.