This year, the labor market has been undergoing a notable cool-down, across many sectors, from its red hot peak after the pandemic when employers rapidly created millions of jobs to keep up with pent-up consumer demand. October’s job gains mark the second lowest increase since 2020. Economists had predicted that the economy churned out around 170,000 jobs in October.
Wage growth moderated slightly in October, rising by 4.1 percent over the previous 12 months to $34.00 an hour.
“This is still one of the best labor markets for workers that we’ve seen relative to the last 30 years,” said Justin Bloesch, a professor of economics at Cornell University. “But it is definitely less hot than it was last year.”
The wave of heightened strikes across the United States, which included 45,000 autoworkers on strike in October, also appeared in the October report, as manufacturing job growth slid by 35,000. Although in the long term, the autoworkers’ new contract is likely to push wages higher across affected industries.
Hiring in health care, government, and social assistance jumped in October, as consumers have continued to shift their spending toward services. Health care added 58,000 jobs, as employment grew in ambulatory health care services and hospitals. Government, which has struggled since the pandemic to retain workers, added 51,000 jobs with the largest gains in local government. Public sector hiring has finally returned to pre-pandemic levels.
In spite of hefty interest rate hikes that are expected to curb spending in the construction sector, the industry added around 23,000 jobs, mainly in specialty trades and the construction of buildings.
Meanwhile, employment in leisure and hospitality, professional and business services, and information, which includes tech saw little to negative growth.
Despite this cooling, the resilient job market is propelling the economy to unexpected highs. The U.S. economy grew at a brisk 4.9 percent annual rate in the most recent quarter, in large part because consumers have the means to keep spending. Wages are rising and inflation has eased in recent months. And fresh data this week shows that productivity is growing by the fastest pace in three years.
As a result, Americans are continuing to open their wallets. Spending on housing and transportation, as well as movie theaters, restaurants and sporting events all rose in August, government data shows, helping support a range of new service jobs.
“If you have a full-employment labor market with the pressures of inflation easing, such that you generate real wage gains — in an economy that’s 70 percent consumer spending, that’s a powerful force with real momentum,” Jared Bernstein, chair of the U.S. Council of Economic Advisers, said in an interview this week.
That solid showing is in stark contrast to widely held recession fears at the start of the year. Many, including the Federal Reserve chair, had expressed concerns that the central bank’s aggressive push to bring down inflation would result in job losses across sectors and could tip the economy into a downturn. That hasn’t happened, at least not yet, even as inflation has eased — to 3.7 percent in September, from last summer’s high of 9.1 percent. This week, Fed Chair Jerome H. Powell announced that he would leave interest rates unchanged for the time being, while calling the job market’s resilience a “historically unusual and very welcome result.”
“The bigger picture, from our standpoint is: We’ve got a very strong economy, strong labor market,” Powell said.
Indeed, recent data confirms that the labor market remains robust by many measures. The unemployment rate, which has risen gradually this year, remains near longtime lows. Job openings ticked up slightly to 9.6 million in September, according to the BLS’s job openings survey released Wednesday, meaning there are roughly 1.6 job openings for every unemployed worker. Layoffs fell to a nine month low in September, data from the same report showed.
Bloesch, the economist at Cornell, said that uncertainty about the future could be pushing employers to hold onto workers rather than conduct layoffs. “Employers don’t know if things are going to boom or slow down,” he said. “So one of the best things to do in the face of uncertainty is hold on to the workers you have.”
Meanwhile, overall strong job creation has been drawing workers back into the labor market. The share of adults between the ages of 25 and 54 participating in the labor market — a metric closely watched by policymakers as a sign of labor market health — has risen to its highest level in two decades.
The public sector, which has struggled since the pandemic to retain workers, is finally beginning to see a boost in job creation, as wages have begun to catch up with the private sector.
Edward Watson, 35, a utilities technician for the city of Ontario, Calif., had been thinking about quitting his local government job for a higher paying one. His wage increases of around 2 or 3 percent a year weren’t keeping up with the cost of living, making it difficult to support his wife and three children. Meanwhile, work had become more stressful as his co-workers retired and quit during the pandemic.
But this summer, Watson’s union secured a 27.5 percent raise for city workers over the next three years, giving Watson a reason to stay, and enticing some of his former co-workers back to work for the city. He received a 9.5 percent wage boost in July and is now making around $36 an hour.
“I’m able put a little more into savings. It helps at the grocery store,” Watson said. “I think a lot of people have a lot more confidence now that they can stay in their jobs with the city.”