Job growth continued in October, but at a slower pace as the Federal Reserve continues to raise interest rates. Total nonfarm payroll employment rose by 261,000 jobs from September, according to data released Friday by the Bureau of Labor Statistics.
So far this year, monthly job growth has averaged 407,000, down from an average of 562,000 per month in 2021. Wage growth has also decelerated this year.
“Wage growth, as measured by average hourly earnings, decelerated to a 4.73 percent year-over-year rate, compared to 4.98 percent in September,” Joel Kan, the vice president and deputy chief economist for the Mortgage Bankers Association, said in a statement. “This was the slowest rate of growth since August 2021. The easing in wage growth might help reduce some inflationary pressure, but we expect the Federal Reserve to continue its current course of policy tightening until there is broader evidence of cooling inflation.”
Despite the job gains in October, unemployment rose by 0.2 percentage points month over month to 3.1%, with a total of 6.1 million unemployed persons.
“The unemployment rate increased slightly to 3.7 percent from 3.5 percent last month, despite a slight decline in labor force participation,” Kan said. “This increase reflects the second time in three months where there has been an uptick in the number of unemployed workers.
Employment in the construction industry changed little from September, adding 1,000 jobs in October, thanks to slight increases in residential and nonresidential building as well as heavy and civil engineering construction, along with a slight decrease in specialty trade contractors. Overall, residential building employment was up 7.7% compared with pre-pandemic levels, while non-residential building remained 4.8% below pre-pandemic levels.
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“The construction industry has faced a skilled labor shortage for years,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “It’s not entirely surprising to see jobs gains in a cooling market, as there are many homes under construction. But the slowdown in homebuilding will put downward pressure on job gains in months to come.”
Real estate and the rental and leasing industries lost 8,700 jobs from September, with real estate losing 900 jobs and rental and leasing services losing 7,800 jobs.
In February 2020, a combined 300,000 were employed in “real estate credit” and as mortgage and nonmortgage loan brokers. As of September, there were roughly 392,000 people in those jobs, suggesting that the industry still has a large number of cuts to make in the coming months as the housing market slows further.
The lion’s share of the job growth in August came from gains in the health care sector (up 53,000 jobs), the professional and technical services sector (up 43,000 jobs), and the manufacturing sector (up 32,000 jobs).
While it is clear that the job market is cooling, experts believe it will take more than a slight deceleration for the Federal Reserve to stop raising interest rates.
“The Fed may still be hoping to engineer a ‘soft landing,’ but its top priority is cooling inflation,” Kushi said. “Despite slowdowns in industries such as housing, the Fed will wait for sustained signs of cooling in the labor market – wage growth – before easing the pace of rate hikes.”