The Labor Department will publish its closely-tracked October jobs report Friday, with investors on high alert for any signs of latent inflation pressures amid the strongest rally of the year on Wall Street and a big pullback in Treasury bond yields.
The Bureau of Labor Statistics is expected to show that the economy added 180,000 net new jobs last month, down from the blowout total of 336,000 recorded in September and the three-month average of 266,000 but still a solid enough pace of employment growth that investors remain worried that wage increases could continue to stoke inflation into the end of the year and beyond .
Economists are forecasting average hourly wages to rise 0.3% on the month, a modestly quicker pace than in September, with the annual gain easing to around 4%.
The headline unemployment rate, however, is likely to stay stuck at 3.8%, which is good news for near-term economic growth, but could challenge the Federal Reserve’s position that a notable labor market slowdown is likely required for it to return inflation to its 2% target and declare the end of its rate hiking cycle.
This puts the now ‘data dependent’ Fed, which is keeping its options open on potential rate hikes over the next two meetings in December and January, keenly-focused on jobs and inflation releases.
Related: Fed holds rates steady, hints at more increases but markets see end of hiking cycle
“We remain committed to bringing inflation back down to our 2% goal and to keeping longer-term inflation expectations well anchored,” Fed Chairman Jerome Powell said Wednesday. “Reducing inflation is likely to require a period of below-potential growth and some softening of labor market conditions.”
Data from earlier this week, however, seems to suggest only a modest cooling in the broader labor market, with ADP’s National Employment report showing a weaker-than-expected addition of 113,000 private sector jobs last month, while noting workers remaining in their roles saw the smallest year-over-year pay increase, at 5.7%, since October of 2021.
“In all, October’s numbers paint a well-rounded jobs picture. And while the labor market has slowed, it’s still enough to support strong consumer spending, said ADP’s chief economist Nela Richardson.
Weekly applications for new jobless benefits, meanwhile, have crept modestly higher, to a four-week average of 210,000, according to the Labor Department’s most-recent tally.
Layoffs, however, appear to have slowed, with Challenger Gray reporting 36,836 announced job cuts over the month of October, down from more than 47,000 in September, while the BLS noted in its September Job Openings and Labor Turnover report Tuesday that around 9.55 million positions went unfilled in September, suggesting demand for new hires remains elevated into the autumn months.
Another wrinkle for this month’s report is the impact of the United Autoworkers Union’s 45-day strike against the Detroit 3 carmakers, which ended earlier this week.
The BLS has said that around 30,000 UAW workers were off the job when it conducted its survey last month, a figure that could exaggerate declines in the manufacturing portion of the October reading, while flattering gains for November.
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