The national unemployment rate has increased to 3.7% after the number of unemployed people in the U.S. rose by 306,000 to 6.1 million, according to the latest report from the U.S. Bureau of Labor Statistics (BLS).
Based on Friday’s BLS data, U.S. employers added 261,000 jobs in October, lagging slightly behind September’s performance of 263,000. The reading comes in the wake of yet another sizable interest rate hike by the Federal Reserve.
Wall Street Journal reports suggest that the report points to continued strength in the labor market, although there have been signs of cooling amid the Fed’s aggressive efforts to reel inflation back in.
Key findings:
- The U.S. added 261,000 jobs last month.
- The average hourly wages for all employees on private nonfarm payrolls rose by 12 cents, or 0.4%, to $32.58.
- Average hourly wages have increased by 4.7% over the past year.
- There were 6.1 million unemployed people in October 2022—down from 7.3 million in July 2021.
- The labor force participation rate (62.2%) and the employment-population ratio (60.0%) were nearly unchanged in October.
- Employment in leisure and hospitality grew by 35,000 jobs.
- Manufacturing added 32,000 jobs in October, with employment in durable goods industries—including products used in homebuilding—up by 23,000.
- Employment in construction grew by 32,000 positions, as specialty trade contractors added 22,000 jobs.
The takeaway:
“There are almost 1 million more workers now compared to pre-pandemic. But if we consider all workers, including those on commission-based income, there were a net 32,800 job cuts in the past month and slightly fewer workers now compared to pre-pandemic,” said Lawrence Yun, chief economist for the National Association of REALTORS®. “That is why the unemployment rate went up to 3.7%. The wage gain was 4.7%, well below the consumer price inflation of 8.2%. The bond market is not liking the news as the yield on the 10-year U.S. government borrowing rate rose to 4.2%.
“The bond market wants a clear picture of dissipating inflation from a lackluster labor market. Mortgage rates, therefore, could be nudged higher after a brief fall this week. However, the mortgage rate could continue to fall if the gap with the government borrowing rate returns to its historical average spread of around 180 basis points. Currently, it is at 300 basis points. In other words, the 30-year mortgage rate could be at 6% today and not 7%. It’s worth investigating why there is such a large spread,” Yun concluded.
“This morning’s jobs report from the Bureau of Labor Statistics points to continued strength in the labor market,” said Doug Duncan, chief economist at Fannie Mae. “As in prior reports, job gains were concentrated in the service-providing sectors, with education and health services (+79,000 jobs), professional and business services (+39,000), and leisure and hospitality (+35,000) showing the largest gains this month.
“Today’s report shows, at best, minimal impact up to this point on tight labor markets from the tightening of monetary policy. In particular, the continued robust wage growth—one of the key indicators watched by the Federal Reserve—indicates that inflation has not yet begun to sufficiently moderate,” Duncan concluded.
“Gains in employment were recorded across all sectors, led by healthcare, professional and technical services, and manufacturing,” said realtor.com® Senior Economist George Ratiu. “The headline unemployment rate rose to 3.7%, with the number of unemployed people at 6.1 million.
“As we head into the last two months of the year, the good news is that labor markets remain strong. In September, there were 10.7 million posted jobs with about half as many unemployed workers looking for work. At the same time, over 4 million people left their employer during the month, the 15th consecutive month above that threshold.
For the Federal Reserve, a tight labor market amplifies the concern that workers will retain an advantage during wage negotiations, leading to higher incomes and continued pressure on prices. At the same time, coming out of a global pandemic, which displaced millions of workers and led to a two-and-a-half-year recovery, the solid job market is keeping Americans on a stronger financial footing, especially amid soaring prices for goods, services and housing.
“For real estate markets, rising employment and pay are welcome news, as they may help to partially offset the significant headwinds brought about by surging mortgage rates. Today’s buyers of a median-priced home are facing monthly mortgage payments which are almost $1,000 higher than just 12 months ago. The drastic jump in financing costs have erected a wall in the path of many buyers looking to get their foot in the door of homeownership. With rates expected to plateau next year, higher incomes could close some of the gap between rising inventory and willing buyers.”
To read the full report, click here.
