What to look for in the last job report before the appointment
When the Bureau of Labor Statistics releases its October jobs report later Friday morning, it will be the last major reading of the economy before next elections — and that will cap off a week of new data signaling that the red-hot job market is showing only temporary signs of cooling.
The US economy is expected to add 200,000 jobs last month, down from 263,000 in September but well above the pre-pandemic average. The unemployment rate is expected to rise slightly to 3.6% from 3.5% – still near a half-century low.
But good news is very often bad news, especially in this pandemic-era economy. (And it could be very bad news for Democrats.)
Complete the latest monthly JOLTS vacancy, termination and layoff survey. Tuesday’s report surprised economists, who had forecast the number of job vacancies in the United States to fall amid measures by the Federal Reserve to slow business growth to tame inflation. But instead of dropping to 10 million, it rose to 10.7 million.
Private sector job and wage growth also rose last month, defying expectations, according to Wednesday’s ADP report.
All of this shows that the Fed’s most aggressive monetary tightening in modern history — doc raising mortgage rates above 7% for the first time in 20 years, slowing business growth and shrinking household spending — barely made a dent in the labor market.
A strong labor market in normal times is the kind of news that might be celebrated, but in 2022 it’s cause for concern, as it suggests the economy is overheating. On Wednesday, the Fed announced its fourth consecutive increase of three-quarters of a point, the latest in a series of aggressive moves that would have been unthinkable just a few months ago.
There are currently 1.9 jobs for every person looking for work, a margin the Fed worries is keeping inflation uncomfortably high. With many options, workers demand higher wages; and with several candidates, managers pay higher salaries, which boosts the demand for goods and services (and therefore raises prices).
The central bank has a dual mandate: to maximize employment (check) and to ensure price stability (undo). Ideally, the Fed would like everyone to keep their jobs while reducing demand only enough to heat up consumer prices, which were at their highest level in 40 years and are currently at 8.2%. Most economists say the likelihood of a so-called soft landing is now slim – although Powell still considers possible.
Analysts around the world say the chances of a recession are high, if not guaranteed. But the Fed is betting that the pain of a recession is preferable, in the long run, to the pain of missing prices.
“Reducing inflation will likely require a continued period of below-trend growth and easing labor market conditions,” Powell said on Wednesday. “Restoring that price stability is essential to setting the stage for achieving stable employment and stable prices over the long term.”
Unfortunately for Democrats trying to hang on to power next week, the pain of inflation appears to be outweighing any positive sentiment about job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in recession.
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