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The labor market is still strong, with 261,000 jobs added in October, but it is definitely slowing. Expect job gains to diminish to less than 200,000 sometime after the turn of the year. The unemployment rate increased to 3.7%. Job growth in food services almost came to a halt. This sector is more sensitive to changes in consumer spending than most. Interest rate hikes are slowing hiring in construction. A decline in warehousing employment indicates that the surge in retail goods is diminishing after working its way through the distribution system.
Wage growth has been easing, especially among blue collar and production workers. Wage growth in this group peaked at 6.8% back in March, and has slowed to 5.5%. It is expected that it will slow further to 4% by mid-year 2023.
The modest slowdown will not be enough to get the Federal Reserve to change its mind about interest rate hikes, but it sets the stage for an easing at the next Fed policy meeting on Dec. 15 if improvement is seen in the Nov. 10 and Dec. 13 consumer price index reports and continued slowing in the next jobs report released on December 2. At the moment, odds are a coin flip between whether the Fed continues its three-quarter point rate hikes or eases to a half-point hike.
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