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Much slower job growth in October, plus downward revisions to August and September numbers, point to a slowing economy. Jobs grew by 150,000 in October, down from 297,000 in September. The autoworkers’ strike lowered the monthly tally by 33,000. The strike has now been resolved, so this 33,000 will be added to November’s job gains. However, the underlying monthly trend should be fewer than 200,000 net new jobs from now on, because of the broader slowdown in the economy.
- The positives: Strong payroll growth continued unabated at hospitals and healthcare facilities. Local governments are still trying to fill a lot of teacher vacancies. Temporary-help employment rose for the first time in nine months. Construction employment, especially in housing, is still rising at a good pace.
- The negatives: Besides the autoworkers, employment in manufacturing was flat to down, except for food manufacturers. The bump up in temporary help is not expected to last. The slowdown in retail was evident in flat retail employment, and declines in trucking, delivery and warehousing jobs. Food-service jobs declined for the second time in three months, indicating that the days of worker shortages in food service may be over.
The unemployment rate ticked up to 3.9% in October. It is likely to stay at that level for a few months because layoff activity does not appear to be increasing at the moment. However, there are signs that those who are already unemployed are having more difficulty finding jobs, and fewer unemployed people are coming into the labor force to look for work.
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Wage growth eased in October to 4.1%, and the easing appears to be a trend, but a very slow one. Wage growth has come down more slowly than anticipated and likely will require more months of slower job gains for the trend to strengthen. We expect that the annual rate will be just under 4.0% by the end of the year, but won’t approach 3.0% until the second half of next year.
The Federal Reserve likely welcomes the labor market slowdown and should leave short-term interest rates unchanged at its next meeting, on December 13. Wage growth remains a worry for the Fed, but enough other signs of a general economic slowdown are happening that it is likely to stop raising rates altogether. However, any cut in short rates is not likely until the second half of next year.
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