BY CHRISTOPHER RUGABER | AP business writer
WASHINGTON – America’s employers continued to hire vigorously in October, adding 261,000 jobs, a sign the economy remains a picture of solid job growth and painful inflation as Election Day approaches.
Friday’s government report showed that hiring was brisk across all sectors over the past month, although overall additions fell from 315,000 in September. The unemployment rate rose to a still-healthy 3.7% from a five-decade low of 3.5%.
The government also said average hourly wages rose 4.7% from a year earlier, a smaller year-on-year gain than in September. Still, last month’s average 12-month pay rise remained high enough to fuel inflation.
A strong job market is deepening the challenges the Federal Reserve faces as it raises interest rates as quickly as possible since the 1980s to try to bring inflation down from a near 40-head high. Steady hiring, solid wage growth and a low unemployment rate have been good for workers. But they have also contributed to rising prices.
The October jobs number was the last major economic report ahead of Election Day, which left voters heavily focused on the state of the economy. Chronic inflation is wreaking havoc on many household budgets and has shot to the forefront of voter concerns in the congressional elections that end Tuesday. Republican candidates have attacked Democrats over inflation to regain control of Congress.
An average of 289,000 new jobs were added in the past three months, compared to a sizzling monthly rate of 539,000 a year ago. All the jobs that employers have created since the end of the recession have boosted consumers’ ability to sustain spending even in the face of high inflation. Labor shortages in many sectors of the economy have also forced companies to pay more to attract and retain workers.
President Joe Biden and congressional Democrats have pointed to the strong rebound in hiring as evidence their policies have helped get Americans back to work faster than the nation has been able to after previous downturns. But that message has been overtaken in medium-term political campaigns by the devastating surge in inflation that has pissed many Americans off the economy under Democratic leadership in Congress and the White House.
The October jobs report showed that job growth was widespread over the past month. Health services added 71,000, with hospitals and doctor’s offices continuing to recruit after losing many at the height of the pandemic. Manufacturing added 32,000. A category that includes engineers, accountants and lawyers added 39,000.
Still, there are signs that some corners of the economy are beginning to falter under the weight of rising prices and much higher borrowing costs brought on by the Fed’s aggressive rate hikes. In sectors such as housing and technology in particular, new hires have declined. Many tech companies, such as ride-hailing company Lyft and payments company Stripe, have announced plans to lay off employees. Amazon said Thursday it would suspend hiring of businesses.
Across the economy, however, the pace of layoffs remains unusually low. And companies in travel, restaurants, manufacturing, and healthcare are still hiring steadily. Southwest Airlines told investors last week that it was on track to hire 10,000 people this year, including 1,200 pilots. The Laboratory Corporation of America said it is planning significant hiring.
At a news conference on Wednesday, Fed Chair Jerome Powell noted that the strong labor market is feeding inflationary pressures as companies continue to hike wages. Average wages rose more than 6% in September from 12 months earlier, according to the Federal Reserve Bank of Atlanta. That was the fastest rate of its kind in 40 years, although it still lagged behind inflation.
Wages tend to follow inflation upwards as workers try to keep up with price increases. These wage increases, in turn, can keep inflation high if companies pass at least some of their higher labor costs on to their customers in the form of higher prices.
Powell spoke after the Fed announced a fourth consecutive three-quarter-point hike in its benchmark interest rate. It was the latest in a series of unusually large hikes that have made mortgages and other consumer and business credit increasingly expensive and increased the risk of a recession.
Fed policymakers opened the door to the possibility of a smaller rate hike when they next meet in December. But Powell also said the Fed would likely need to raise rates high enough to weaken the labor market in order to tame inflation. That could mean that hiring numbers will slow in the coming months or even many employers will cut jobs and the unemployment rate will increase.
So far this year, the Fed has hiked its short-term interest rate six times – from near zero in early March to a range of 3.75% to 4%, its highest level in 14 years.
Housing has absorbed the worst of the damage from higher borrowing costs. The Fed’s rate hikes have pushed average long-term mortgage rates to around 7%, the highest in two decades. As a result, home sales have skyrocketed and once-rising home prices have begun to slow.
The economy is still growing at the moment. It expanded at an annual rate of 2.6% in the July-September quarter after contracting in the first six months of the year. But much of the growth last quarter came from a surge in U.S. exports. In contrast, consumers – the main engine of the economy – increased their spending only slightly above the rate of inflation.
With inflation still painfully high and the Fed making it increasingly expensive for consumers and businesses to borrow, most economists expect a recession early next year.
https://www.ocregister.com/2022/11/04/us-employers-keep-hiring-briskly-even-in-face-of-rate-hikes-2/ US employers remain keen on hiring even in the face of rate hikes – Orange County Register