WASHINGTON (Reuters) – U.S. employers likely hired the fewest number of workers in nearly two years in October and raised wages at a moderate pace, suggesting some easing in labor market conditions, which will allow the Federal Reserve to shift toward lower increases in employment. interest rates. Starting in December.
The closely watched Labor Department employment report on Friday is also expected to show the unemployment rate rising to 3.6% from 3.5% in September. The Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points and said its fight against inflation will require increased borrowing costs.
But the central bank indicated it may be approaching an inflection point in what has become the fastest monetary tightening in 40 years.
“The job market is basically okay, but it seems to be slowing down,” said Jay Berger, LinkedIn’s chief economist.
in San Francisco. “The Fed will try to slow down the labor market enough to put downward pressure on wages and inflation, without causing a recession.”
Nonfarm payrolls are likely to have increased by 200,000 jobs last month after rising by 263,000 in September, according to a Reuters survey of economists. This will be the lowest gain since December 2020, when salaries fell under the onslaught of the COVID-19 infection. Estimates ranged from 120,000 to 300,000.
Employment gains may have been distributed roughly evenly across industry sectors, in keeping with modern patterns, with the leisure and hospitality industry leading the way. Employment opportunities in leisure and hospitality remain below pre-pandemic level with at least 1 million jobs. It is possible that interest rate-sensitive industries such as financial activities as well as transportation and warehousing have shed jobs as they did in September. Government payrolls are expected to fall further.
Hurricane Ian is expected to have a slight impact on payrolls. The storm hit Florida in late September and boosted unemployment claims in mid-October, when the government surveyed businesses for its employment report last month.
“Hurricane Ian should have at least some negative impact on non-farm payrolls,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. “We have slightly lowered our forecast to show an increase of 150,000 (from 200,000) assuming that at least some workers are sidelined in the areas hardest hit by the hurricane.”
Supporting positions
Job growth remained strong even as domestic demand slumped amid rising borrowing costs as companies replaced workers who were leaving. But as recession risks mount, this practice may soon come to an end. A survey by the Institute of Supply Management Thursday showed that some service industry firms are “deferring refilling open positions,” due to uncertain economic conditions.
However, the labor market remains tight, with 1.9 jobs opened for every unemployed person at the end of September.
Average hourly earnings are expected to rise 0.3%, in line with September’s gain. But there is a risk of an upward surprise due to Hurricane Ian as well as the calendar issue. According to Crandall of Wrightson ICAP, storms and other events that put people off work during the week of the salary survey can artificially raise the reported level of hourly earnings.
The government surveys businesses and households during the week that includes the twelfth day of the month.
“It included a salary survey week on the 15th of the month, which tends to bias the month/month change up, since the pay increases guaranteed by those workers who get paid in the middle of the month and the end of the month rather than biweekly are more likely to be,” said Kevin Cummins. , chief US economist at NatWest Markets in Stamford, Connecticut.
Excluding any distortions of weather and calendar, wage growth cools. Average hourly earnings are expected to rise 4.7% year-on-year in October after rising 5.0% in September. Other wage measures have also escaped a boil, which bodes well for inflation.
“We think we’ve seen peak wage growth,” said Michelle Green, Privilege’s chief economist in Columbus, Ohio. “So while we will continue to see year-on-year growth in average hourly earnings across all private sector employees, the pace of that growth is really starting to slow down.”
(Reporting by Lucia Motikani) Editing by Cynthia Osterman
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