Friday, November 4, 2022
Thus far, we’re seeing no cracks in the U.S. labor market. Non-farm payrolls reported this morning by the Bureau of Labor Statistics (BLS) came in at +261K for the month of October, +233K in the private sector alone. This follows an upwardly revised +315K the previous month. The Household Survey this morning brings an Unemployment Rate headline of +3.7%, up 20 basis points (bps) month over month, and the highest unemployment figure since February of this year.
While we look at quarter-million-plus monthly job gains with a jaundiced eye these days, relatively we are seeing a slowdown in overall employment: October’s 261K is the slimmest level of gains since the big negative jobs report in December 2020. The Household Survey actually documented -328K jobs lost for the month, which is apparently at cross-purposes with the BLS figures. Over the past six months, we’re seeing around -100K new jobs added on average per month compared to the 12-month average.
Average Hourly Earnings rose +0.4% last month, ahead of the +0.3% expected and the highest level since July. Year over year, we see +4.7% — drifting lower, but not as far or as quickly as expected. Labor Force Participation remained low-ish, +62.2% — 20 bps below August and 120 bps lower than pre-Covid levels. The U-6 survey, aka “real unemployment,” reached +6.8%, up a tick month over month but below pre-pandemic levels.
Healthcare was the sector that brought the highest number of new jobs in October, +53K, followed by Professional/Business Services at +43K. Leisure and Hospitality brought in another +35K, while Manufacturing surprised to the upside with +32K job fills. While these totals are far from the huge gains we’d seen throughout the Great Reopening, including routine Leisure/Hospitality numbers in triple digits, we continue to see a labor market not struggling as many analysts had been expecting by this time in the year.
We do expect to see layoffs into the end of 2022/start of 2023, and indeed we already see companies like Twitter (TWTR), (in)famously having been taken over by Tesla and SpaceX CEO Elon Musk, ready to lay off perhaps thousands of employees as early as today. In Big Tech generally, analysts are seeing companies trim guidance, and many will likely make moves to tighten their belts in terms of workforce. And as long as Housing remains weak in the face of higher mortgage rates come from higher Fed interest-rate hikes, Construction can be expected to remain muted.
Counter this with what the U.S. has been embarking upon over the past year or so: Manufacturing at home, rather than overseas. This will only accelerate once semiconductor foundries are up and running in various sections of the U.S. Green energy initiatives are also seeing meaningful investment for the first time in U.S. history. Thus, while we may see some growing pains as American workers shift toward different industries over time, it’s tough to see a scenario in which the labor market completely bottoms out.
What does this mean for the Fed? Same thing they’ve been telling us for months: higher rates for longer. With Fed Chair Powell keeping his eye on optimum inflation levels at +2%, he won’t be getting there with only slight augmentations to historically robust employment figures.
If it’s a race between the Fed moving interest rates to 5% (at 75 bps per clip) versus, say, core PCE coming down to 2%, the Fed is going to win and win easily. From this vista, it doesn’t look like the labor force is going to break anytime soon; we should look elsewhere for signs of meaningful economic weakness.
Questions or comments about this article and/or its author? Click here>>
Image: Bigstock
October Jobs +261K: Higher than Expected, Lowest in 2 Years
Friday, November 4, 2022
Thus far, we’re seeing no cracks in the U.S. labor market. Non-farm payrolls reported this morning by the Bureau of Labor Statistics (BLS) came in at +261K for the month of October, +233K in the private sector alone. This follows an upwardly revised +315K the previous month. The Household Survey this morning brings an Unemployment Rate headline of +3.7%, up 20 basis points (bps) month over month, and the highest unemployment figure since February of this year.
While we look at quarter-million-plus monthly job gains with a jaundiced eye these days, relatively we are seeing a slowdown in overall employment: October’s 261K is the slimmest level of gains since the big negative jobs report in December 2020. The Household Survey actually documented -328K jobs lost for the month, which is apparently at cross-purposes with the BLS figures. Over the past six months, we’re seeing around -100K new jobs added on average per month compared to the 12-month average.
Average Hourly Earnings rose +0.4% last month, ahead of the +0.3% expected and the highest level since July. Year over year, we see +4.7% — drifting lower, but not as far or as quickly as expected. Labor Force Participation remained low-ish, +62.2% — 20 bps below August and 120 bps lower than pre-Covid levels. The U-6 survey, aka “real unemployment,” reached +6.8%, up a tick month over month but below pre-pandemic levels.
Healthcare was the sector that brought the highest number of new jobs in October, +53K, followed by Professional/Business Services at +43K. Leisure and Hospitality brought in another +35K, while Manufacturing surprised to the upside with +32K job fills. While these totals are far from the huge gains we’d seen throughout the Great Reopening, including routine Leisure/Hospitality numbers in triple digits, we continue to see a labor market not struggling as many analysts had been expecting by this time in the year.
We do expect to see layoffs into the end of 2022/start of 2023, and indeed we already see companies like Twitter (TWTR), (in)famously having been taken over by Tesla and SpaceX CEO Elon Musk, ready to lay off perhaps thousands of employees as early as today. In Big Tech generally, analysts are seeing companies trim guidance, and many will likely make moves to tighten their belts in terms of workforce. And as long as Housing remains weak in the face of higher mortgage rates come from higher Fed interest-rate hikes, Construction can be expected to remain muted.
Counter this with what the U.S. has been embarking upon over the past year or so: Manufacturing at home, rather than overseas. This will only accelerate once semiconductor foundries are up and running in various sections of the U.S. Green energy initiatives are also seeing meaningful investment for the first time in U.S. history. Thus, while we may see some growing pains as American workers shift toward different industries over time, it’s tough to see a scenario in which the labor market completely bottoms out.
What does this mean for the Fed? Same thing they’ve been telling us for months: higher rates for longer. With Fed Chair Powell keeping his eye on optimum inflation levels at +2%, he won’t be getting there with only slight augmentations to historically robust employment figures.
If it’s a race between the Fed moving interest rates to 5% (at 75 bps per clip) versus, say, core PCE coming down to 2%, the Fed is going to win and win easily. From this vista, it doesn’t look like the labor force is going to break anytime soon; we should look elsewhere for signs of meaningful economic weakness.
Questions or comments about this article and/or its author? Click here>>