Mixed October report on the U.S. labor market

The overburdened U.S. labor market is beginning to stabilize, with Friday's data showing a slowdown in the pace of employment and an increase in the unemployment rate.

The October financial report was quite significant by historical standards. However, the Fed's series of rate hikes aimed at cooling the economy has so far shown only limited impact on employers' willingness to hire more workers.

According to the latest reports, employers created 261,000 new jobs in the past month, and the unemployment rate rose from 3.5% to 3.7%. That's a lower job gain than September's figure of 315,000, though higher than economists' forecast of 200,000.

October marks the smallest gain in U.S. jobs since December 2020. Nevertheless, it's still a solid gain by historical standards. The economy added an average of 183,000 jobs a month during the decade before the pandemic.

Some economists have argued that the Fed could slow the pace of rate hikes to half a percent, rather than three-quarters as it has done in recent meetings.

Pantheon Macroeconomics chief economist Ian Shepherdson said labor market tensions are beginning to ease. However, we are still a long way away from indicators that would indicate the Fed is ending its tightening policy. One way or another, if they expect these trends to strengthen, markets will push the Fed to rethink the idea of continuing to raise rates next year.

In addition to overall employment numbers, another key indicator the Fed is focusing on is wage growth, as higher wages can create inflationary pressure by putting more money in the hands of consumers and stimulating demand for goods and services.

The October jobs report showed a slowdown in wage growth, with average wages paid by businesses rising just 3.8% year over year, up from 4.1% in September, and well below the 5% or more growth seen earlier this year and last year.

Even when wage growth was 5%, it did not match the rate of price growth, which averaged 8.2% according to the latest data. The slower pace of wage growth indicates that American consumers will have an even harder time paying for more expensive goods and services.