The economy added 261,000 jobs in October, more than expected, a sign of resilience in the face of the Federal Reserve’s interest rate hikes and a boost for President Joe Biden and Democrats just ahead of the midterm elections.
Yet the unemployment rate rose two-tenths of a percentage point to 3.7%, still a historically low figure, the Bureau of Labor Statistics reported Friday morning.
“The October employment report is more of a mixed bag than we’ve seen recently, consistent with an economy absorbing this year’s interest rate increases, a strong dollar, high inflation, and challenges confronting the global economy,” said Mark Hamrick, senior economic analyst at Bankrate.
Friday’s report is being closely scrutinized as it is the last major economic statistic that will be released before voters head to the polls next Tuesday to decide which party will control Congress. The headline jobs numbers will aid the Biden administration and Democrats, who have been on the defensive as scorching inflation weighs heavily on the economy.
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Still, other parts of Friday’s report were not as encouraging. Labor force participation, the share of adults working or looking for work, shrank slightly to 62.2%. Participation and overall employment rates have still not recovered from the hits they took in the pandemic.
On the other hand, wage growth remained strong — average hourly earnings have grown 4.7% over the past year, only a slight deceleration. Those gains have been undercut by inflation, though, meaning that workers have been losing purchasing power.
As a whole, the report is a mixed bag for the Fed. Fed officials would like to see nominal wage growth slow faster as part of the effort to contain inflation. As a whole, the new data showed relatively few signs of the Fed’s efforts to slow economywide spending through interest rate hikes — even the construction sector added jobs in October, despite the huge run-up in mortgage rates driven by the Fed’s actions, which have led some analysts to say the sector is in recession.
Economists have been on high alert for recession throughout the year because gross domestic product shrank in the first two quarters of the year — a situation commonly used to define a recession. In the third quarter, though, GDP increased at a 2.6% annual rate.
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Still, other signs indicate that a downturn may be in store. In addition to the havoc in housing and construction, for instance, the tech sector has seen the start of mass layoffs.
“The continued job growth and rising wages may appear as positive news for workers in the short term, but the gains are tied to continually rising inflation as families try to weather the rising cost of living and as businesses compete to fill millions of job openings that actually increased over the last month,” Austen Bannan, senior policy analyst at Americans for Prosperity, told the Washington Examiner.
At its meeting this week, the central bank raised its interest rate target by a whopping 75 basis points, the fourth straight hike of such an aggressive degree. The move is designed to dampen demand by raising borrowing costs but can result in the economy falling into a recession and people possibly losing their jobs.
“We’re taking forceful steps to moderate demand so that it comes into better alignment with supply. Our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer-term inflation expectations well anchored,” Fed Chairman Jerome Powell said Wednesday. “Reducing inflation is likely to require a sustained period of below-trend growth and some softening of labor-market conditions.”
