- Non-farm payrolls forecast an increase of 200,000
- Unemployment rate increased from 3.5% to 3.6%
- Average hourly earnings are expected to increase by 0.3%
WASHINGTON, Nov 4 (Portal) – US employers likely hired the fewest workers in nearly two years in October and raised wages at a moderate pace, suggesting some easing in labor market conditions that would allow the Federal Reserve to increase lower interest rate hikes from December.
Friday’s closely-watched jobs report from the Labor Department is also expected to show that unemployment rose to 3.6% from 3.5% in September. The Fed announced another 75 basis point hike in interest rates on Wednesday, saying its fight against inflation would require a further hike in the cost of borrowing.
But the central bank signaled that it may be approaching a tipping point in the fastest tightening of monetary policy in 40 years.
“The job market is fundamentally fine, but it seems to be slowing down,” said Guy Berger, chief economist at LinkedIn
in San Francisco. “The Fed will try to thread the needle where it slows down the labor market enough to put downward pressure on wages and inflation without triggering a recession.”
Nonfarm payrolls are likely to have risen by 200,000 jobs last month, after rising by 263,000 in September, according to a Portal poll of economists. That would be the smallest gain since December 2020, when payrolls fell amid an onslaught of COVID-19 infections. Estimates ranged from 120,000 to 300,000.
Job gains are likely to have been spread almost evenly across industrial sectors, in line with recent patterns, with leisure and hospitality leading the way. Employment in leisure and hospitality remains at least a million jobs below pre-pandemic levels. Rate-sensitive sectors such as financial activities and transport and warehousing are likely to shed jobs as they did in September. Government salaries will continue to fall.
Hurricane Ian may have weighed slightly on the payroll. The storm swept through Florida in late September and pushed up jobless claims in mid-October as the government polled companies for last month’s jobs report.
“Hurricane Ian should have at least some negative impact on nonfarm payrolls,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. “We’ve lowered our forecast slightly to show an increase of 150,000 (from 200,000), assuming at least some workers in the areas hardest hit by the hurricane have been marginalized.”
FILLING POSITIONS
Job growth has remained solid, although domestic demand has softened amid higher borrowing costs as companies replaced workers who would have left. However, given the rising risks of a recession, this practice could soon end. A poll by the Institute for Supply Management on Thursday found that some service industry companies are “holding back on filling vacancies due to uncertain economic conditions.”
Nevertheless, the labor market remains tight with 1.9 job offers per unemployed person at the end of September.
Average hourly earnings are forecast to have risen 0.3%, in line with September’s gain. But there is a risk of a positive surprise due to Hurricane Ian as well as a calendar quirk. According to Wrightson ICAP’s Crandall, storms and other events that keep people off work during payroll week can artificially increase reported hourly wage levels.
The government surveys businesses and households during the week that includes the 12th day of the month.
“The week of payroll included the 15th of the month, which tends to skew the month-to-month change higher as wage increases secured by workers paid mid-month and end-of-month are more likely to occur rather than bi-weekly recorded,” said Kevin Cummins, chief US economist at NatWest Markets in Stamford, Connecticut.
Stripping out all of the weather and calendar feature distortions, wage growth cools. Average hourly wages are expected to have risen 4.7% yoy in October after rising 5.0% in September. Other wage measures have also gone haywire, which bodes well for inflation.
“We think we’ve seen the peak of wage growth,” said Michelle Green, chief economist at Prevedere in Columbus, Ohio. “So while we will continue to see year-over-year growth in the average hourly wage of all employees in the private sector, the pace of that growth is really starting to slow.”
Reporting by Lucia Mutikani; Editing by Cynthia Osterman
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