October’s Jobs Report Is a ‘Mixed Bag’

Construction workers fasten the frame of a new building in Miami, Fla., on May 3, 2021. Marta Lavandier/AP Photo

While the newly released employment report beat forecasts in terms of sheer job creation numbers, and prompted a victory lap by President Joe Biden, some experts say it’s a “mixed bag,” with the unemployment rate rising and prime working age employment falling, and others saying the Federal Reserve is likely to find much of the data “unsettling.”

The Bureau of Labor Statistics (BLS) said in its Nov. 4 non-farm payrolls report that the U.S. economy aded 261,000 new jobs in October, topping the market estimate of 200,000.

Biden issued a statement following the data release, saying that the numbers show that wages are rising, the unemployment rate remains at an historically low 3.7 percent, and “our jobs recovery remains strong.”

“One thing is clear: While comments by Republican leadership sure seem to indicate they are rooting for a recession, the U.S. economy continues to grow and add jobs even as gas prices continue to come down,” Biden added.

But a number of analysts and economists have pointed to some data in the employment report that call into question just how strong the jobs market really is.

“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,” Mark Hamrick, senior economic analyst at Bankrate, told The Epoch Times in an emailed statement.

For one, the leisure and hospitality sector added just 35,000 jobs last month, while the unemployment rate rose more than markets expected, to 3.7 percent.

“Hiring failed to keep pace with the robust trends of the past couple of years. It is quite possible that we’ve seen the low established in the unemployment rate for a while, moving up to 3.7 percent, and the number of unemployed rising by 300,000, to 6.1 million,” Hamrick said.

‘Really Crummy’

Friday’s jobs report showed that the labor force participation rate dipped to 62.2 percent from 62.3 percent in September, and the employment-to-population ratio continued to hover around 60 percent, which is still below pre-pandemic levels.

There was also a relatively sharp 0.4 percentage-point drop in the prime working age employment-to-population ratio, to 79.8 percent from September’s 80.2 percent, bringing the ratio back to where it was around the beginning of the year.

“Some of this is probably noise, but there’s a very real 2022 pause in this core barometer,” commented Guy Berger, chief economist at LinkedIn, in a post on Twitter.

While the establishment survey portion of the jobs report was relatively upbeat, showing job growth slowing but remaining above the pre-pandemic trend, the household survey part was “really crummy,” Berger added.

“Even if you think this report is noise, you can’t deny there was a meaningful slowdown in the household survey since early 2022,” he said.

Wage Growth ‘Elevated’

Wages grew by a bigger than expected 0.4 percent month over month, the report also showed. While a welcome development by inflation-squeezed workers, rising wages are sure to be eyed with some caution by the Federal Reserve.

Fed Chair Jerome Powell said at a press conference this week that wage growth, like inflation itself, has remained “elevated,” reinforcing a picture of a tight labor market.

“The broader picture is of an overheated labor market where demand substantially exceeds supply,” Powell said.

“We keep looking for signs ... sort of [that] the beginning of a gradual softening is happening,” he continued. “Maybe that’s there. But it’s not obvious to me, because wages aren’t coming down. They’re just moving sideways at an elevated level, both ECI and average hourly earnings.”

Powell was referring to the Employment Cost Index (ECI), a key measure of wage growth, which jumped by 5.0 percent in the third quarter compared to the same period last year, BLS data showed.

Economist Mohamed El-Erian, the former CEO of investment management firm Pimco, characterized Friday’s jobs report as “strong,” but “with a disappointment.”

El-Erian noted in a post on Twitter that the Federal Reserve is likely to find the drop in the labor force participation rate, along with the forecast-beating job creation numbers and the bigger-than-anticipated wage growth, “all unsettling.”

While he didn’t elaborate, his remarks suggest that the Fed is likely to see the data points he listed as evidence of labor market tightness that feed into inflation and possibly as evidence that more monetary tightening is needed to quash price pressures.

Justin Wolfers, an economist and senior fellow at the Brookings Institute, wrote in a series of posts on Twitter that “for Fed watchers, today’s report is a tricky one.”

“The labor market is clearly hot, and hotter than the Fed wants. But really, it cares about how hot the jobs market is only to the extent that it drives wages and prices higher. And wage growth appears to be slowing, a bit,” he said.

While average hourly earnings indeed slowed their pace of growth in annual terms, from 5.0 percent in September to 4.7 percent in October, in month-over-month terms wage growth accelerated from 0.3 percent in September to 0.4 percent last month.

“If the Fed believes that a tight economy directly drives prices higher—even if wage growth doesn’t take off—then it'll be less impressed by moderate wage growth and more concerned that the economy is running too hot,” Wolfers continued, adding that he suspects this is “the majority view.”

Hamrick, meanwhile, told The Epoch Times that he thinks a labor market slowdown is imminent.

“Over the next year, the pace of hiring is likely to slow sharply, if as many expect the unemployment rate edges up over the 4 percent level. That’s in the context of a high likelihood of a recession emerging,” he said.

Some economists believe the United States has already fallen into a recession, even though the official arbiters of business-cycle downturns at the National Bureau of Economic Research (NBER) have yet to call it as such.

‘No Doubt We’re in a Recession’

The U.S. economy contracted for two consecutive quarters this year, meeting the informal definition of a recession.

“There’s no doubt we’re in a recession,” Kavan Choksi, founder at KC Consulting, told The Epoch Times in an emailed statement.

The Fed’s own economic projections show policymakers expect the unemployment rate to rise to 4.4 percent as they hike rates to dampen demand and bring down inflation.

The jobless rate rising to this level would mean an additional 1.2 million Americans losing their jobs, with people on lower incomes the most vulnerable.

“The Fed has been explicit in saying that economic conditions must worsen further before we can claim victory over inflation,” Choksi said.

“This almost certainly will mean that those on lower incomes will continue to suffer the most until the specter of inflation is well and truly behind us,” he added.