Unemployment Rate Rises, but Job Market Keeps Chugging Along

Employers added 261,000 jobs in October, the Labor Department announced Friday, surprising analysts who were expecting to see a number about 20% lower. At the same time, the monthly increase was the smallest since late 2020 and below September’s upwardly revised 315,000, indicating some degree of cooling in the labor market.

The unemployment rate went up: Despite the stronger-than-expected results, the unemployment rate rose to 3.7%, up two-tenths of a percentage point from a 50-year low. The separate household survey used to calculate the unemployment rate showed a decrease in the total number of jobs, with employment falling by 328,000. The labor force shrank slightly, too, decreasing by 22,000, with the labor force participation rate slipping from 62.3% to 62.2%.

Average hourly pay rose 0.4% on a monthly basis and 4.7% on an annual basis — a substantial annual increase, but one that is below the 16-year peak of 5.6% recorded in March and below the rate of inflation, leaving workers worse off on average.

What it means: Overall, job growth is slowing but is still quite vigorous. "The report points to a labor market that remains strong despite some recent signs of cooling following the Federal Reserve’s aggressive pace of interest rate increases," The Wall Street Journal’s David Harrison said.

Mixed signals: Reporters and analysts highlighted the mixed results in the report, with Bloomberg’s Augusta Saraiva and Vince Golle saying that it shows "a job market that’s cooling albeit not very quickly."

"The labor market’s going from 100 miles per hour to 85," economist Rob Dent of Nomura told the Journal. "The Fed’s looking for 40, and we’re still not very close to that," he added, referring to the Federal Reserve and its aggressive campaign to slow the economy and reduce inflation.

Bloomberg economists Anna Wong, Andrew Husby and Eliza Winger said the report "sends mixed signals about the labor market, with one survey showing robust job gains while another shows a big jump in unemployment. Filtering the noise in the data, our takeaway is that the labor market is still very tight and much adjustment still needs to occur before unemployment is close to a neutral level."

White House emphasizes market strength: In a statement, President Joe Biden said the October report "shows that our jobs recovery remains strong," adding that "the US economy continues to grow and add jobs even as gas prices continue to come down."

Jared Bernstein, a member of Biden’s Council of Economic Advisers, told Politico that the jobs report suggests that the economy is nowhere near a recession: "This economy has been incredibly resilient to every damn thing you want to throw at it, and I see no reason that won’t continue."

Economist Betsey Stevenson of the University of Michigan, who served as an adviser to President Barack Obama, said the report reflects robust conditions in the labor market that are hard to square with the idea of an impending slowdown. "Employers continue to be worried that it’s going to be harder to hire tomorrow than today, so that actually suggests they don’t see a recession on the horizon," she told the Associated Press.

The bottom line: Another data point telling us that the labor market is still booming, with little to suggest that the Federal Reserve will soon pause its campaign to tighten monetary conditions in the economy. "This report was definitely strong enough to keep the Fed on track raising rates," UBS economist Jonathan Pingle told the Associated Press.