Economic outlook October job openings spike while unemployment ticks higher

The U.S. Bureau of Labor Statistics released its jobs report¹ for October, showing a 261,000 increase in the number of jobs. This is below both the average monthly job growth of 407,000 in 2022 and of 562,000 in 2021. The number blew through the 190,000²  added jobs that economists expected, although it was slightly below the 315,000 jobs added in September.

The unemployment rate rose 0.2% from the prior month, keeping it within the 3.5% to 3.7% range it’s maintained since March. Meanwhile, the labor force participation rate of 62.2% and the employment-population ratio of 60% saw little change and remain about 1.2% below their pre-pandemic levels. The number of permanent job losers also showed little change, coming in at 1.2 million people in October. Likewise, the number of long-term unemployed, which represents 19.5% of total unemployed, stayed about the same. The number of discouraged workers decreased in October by 114,000 month over month, bringing the total down to 371,000.

The data indicates that the labor market remains strong, but in the face of high interest rates and rising prices, it is starting to moderate.

Industries posting the largest gains

Health care saw the largest growth in employment, with 53,000 jobs added in October. Professional and technical services also had relatively high growth, adding 43,000 jobs. Manufacturing added 32,000 jobs, bringing the average monthly gains in 2022 to 37,000. This is about 23% higher than in 2021. Leisure and hospitality continued its trend of strong job growth with an additional 35,000 jobs.

Unemployment

With regard to worker groups, the data was mostly unchanged. The exceptions were white people (3.2%) and adult women (3.4%). Jobless rates in the other categories were: adult men (3.3%), teenagers (11.0%), Black people (5.9%), Asian people (2.9%) and Hispanic people (4.2%).

A labor shortage

The jobs report was released on the heels of the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, which revealed that the number of job openings rebounded in September after shrinking in August. The 10.7³ million job openings in September indicate that there are 1.9 jobs available for every worker. However, the number of people quitting their jobs remained constant in September, and hiring declined by 252,000 in the month.

Fed policy

The data in the jobs report and the JOLTs survey indicate a persistent labor shortage. The tight labor market is creating wage pressures that fuel inflation and stymie Federal Reserve efforts to rein in inflation. The Federal Open Market Committee met on Nov. 1-2, and its decision to hike rates an additional 0.75% was strongly influenced by the robust labor market. Wages continue to creep higher. The jobs report revealed 0.4% growth in average nonfarm hourly earnings in October, with a 4.7% increase in the past 12 months. Private-nonfarm average hourly wages are now $32.58.

While market observers largely anticipated the most recent 0.75% rate hike, the fourth such consecutive increase this year, there was a hope that future hikes might be smaller. However, the uptick in job openings suggests that the hawkish Fed policy stance may not abate in the near future. Inflation remains stubbornly high and came in at 8.2% in September. The supply/demand imbalance in the labor market is a strong headwind to the Fed’s goal of reducing inflation back down to its 2% target rates. As such, the jobs report will likely be a significant factor influencing policy decisions at the next FOMC meeting scheduled for Dec. 13-14.

The implications for the economy are significant. Higher interest rates for longer periods of time heighten the risk of the U.S. slipping into a recession.