US jobs growth slows in October; unemployment rate rises to 3.9%

JOBS growth in the US slowed more than expected in October, in part as strikes by the United Auto Workers (UAW) union depressed manufacturing payrolls. Meanwhile, wage inflation cooled, pointing to an easing in labour market conditions.

Non-farm payrolls increased by 150,000 jobs last month, the Labor Department’s Bureau of Labor Statistics (BLS) said in its closely watched employment report on Friday (Nov 3). Data for September was revised lower to show 297,000 jobs created, instead of 336,000 as previously reported.

Economists polled by Reuters had forecast payrolls rising 180,000. The US economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.

Manufacturing employment fell by 35,000, after increasing by 14,000 in September. The BLS reported last week that there were at least 30,000 UAW members on strike during the period it surveyed business establishments for October’s employment report.

Last month, the UAW launched the first simultaneous work stoppage at the “Big Three” automakers – General Motors, Stellantis and Ford – pushing for higher wages and other improvements. It expanded the labour action as negotiations wore on; at its height, the strike mobilised more than 45,000 workers.

The impact from the movement reflects both striking workers and related layoffs at other firms in the supply chain, said economist Nancy Vanden Houten of Oxford Economics.

“The UAW has reached tentative contracts with all three car companies, but the agreements came too late in the month to be reflected in the October jobs report,” she added in a recent note.

The strikes have since ended, which could provide a lift to November’s payrolls. Average hourly earnings rose 0.2 per cent after climbing 0.3 per cent in September. In the 12 months through October, wages increased 4.1 per cent after rising 4.3 per cent in September. The unemployment rate rose to 3.9 per cent from 3.8 per cent.

The report could strengthen financial market expectations that the Federal Reserve is done raising interest rates for the current cycle. The US central bank held rates unchanged on Wednesday, but left the door open to a further increase in borrowing costs in a nod to the economy’s resilience.

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The labour market is the major force behind the US economy’s staying power, with GDP recording an annualised growth pace of nearly 5 per cent in the third quarter. It has been unexpectedly resilient over the past year, even as the central bank lifted interest rates rapidly to combat inflation – a move that typically sees hiring cool and unemployment edge up.

Though wage pressures are easing because of the expanding labour pool and fewer people changing jobs, the annual growth in average hourly earnings remains above the 3.5 per cent that economists say is consistent with the Fed’s 2 per cent target.

Wages have not been the main driver of inflation, but some economists worry that recent hefty contracts – including the ones scored by the UAW, airline pilots and the union representing UPS workers – could complicate the Fed’s fight against inflation.

They argued that the recent surge in worker productivity would not be enough to offset the higher compensation as the economy was now predominantly services.

But others disagreed, saying that the record-setting contracts would only become an issue for wage inflation if the Fed raised rates too high and choked off demand. They viewed the UAW contract as getting wages in the auto sector more aligned with the surge in productivity during the Covid-19 pandemic.