US Job Growth Slows in October Amid Auto Strikes
Job growth in the United States (US) experienced a larger decline than expected in October, partly due to strikes organized by the United Auto Workers (UAW) union against major car manufacturers in Detroit. These strikes resulted in a decrease in manufacturing payrolls, impacting the overall employment numbers.
According to the Bureau of Labor Statistics (BLS) within the Labor Department, the US economy added 150,000 nonfarm jobs last month. However, this figure fell short of economists’ predictions of a rise of 180,000 in payrolls. September’s data was also revised down to 297,000 jobs created, lower than the previously reported 336,000.
Manufacturing employment took a hit, declining by 35,000 jobs following a modest increase of 14,000 in September. The BLS revealed that during the data collection period for October’s employment report, around 30,000 UAW members were involved in strikes. As these strikes have now ended, there is the potential for a boost in November’s payrolls.
Additionally, wage inflation eased during this period, signaling a softening in labor market conditions. Average hourly earnings saw a 0.2 percent rise, compared to a 0.3 percent increase in September. Over the 12-month period leading up to October, wages grew by 4.1 percent, slightly lower than the 4.3 percent increase in September. The unemployment rate also rose from 3.8 percent to 3.9 percent.
Based on this report, it is possible that the Federal Reserve has completed its current cycle of interest rate hikes. While the central bank chose to keep rates unchanged recently, it did indicate the potential for future increases as a result of the economy’s resilience.
The labor market remains a crucial factor behind the economy’s durability, with the gross domestic product (GDP) exhibiting an annualized growth rate of nearly 5 percent in the third quarter.
Although wage pressures have diminished due to a growing labor pool and fewer job changes, the yearly growth in average hourly earnings still exceeds the 3.5 percent level deemed consistent with the Federal Reserve’s 2 percent target. While wages have not been the primary driver of inflation, there is concern among some economists that significant recent contracts, such as those negotiated by the UAW, airline pilots, and UPS workers’ union, could complicate the Fed’s battle against inflation.
These economists argue that the recent surge in worker productivity may not sufficiently offset the higher compensation, especially given the economy’s shift toward a predominantly service-oriented sector.
However, others hold a different view and suggest that these historically significant contracts would only pose a problem for wage inflation if the Federal Reserve were to raise rates excessively, potentially dampening demand. They perceive the UAW contract as a means of aligning wages in the auto sector with the surge in productivity during the Covid-19 pandemic.
In conclusion, US job growth faced a slowdown in October, primarily due to the strikes led by the UAW union against major car manufacturers. This resulted in a decline in manufacturing payrolls, impacting overall employment numbers. Additionally, wage inflation eased during this period, indicating a softening in labor market conditions. The report may signal that the Federal Reserve has completed its current cycle of interest rate hikes. With the labor market remaining crucial to the economy’s durability, the impact of significant contracts on wage inflation remains a subject of debate among economists.
