Modest Slowing on Jobs Won’t Deter the Fed (Yet)

In the numbers: an indication that some sectors (restaurants, construction) are feeling the economy's hiccups more than others.

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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.

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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.

David Payne
Staff Economist, The Kiplinger Letter
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.