The Federal Reserve could switch to smaller interest rate increases starting in December if the labor market conditions loosen up as indicated by the fact that American employers probably hired the fewest workers in almost two years in October and increased wages at a moderate pace.
It is also anticipated that the unemployment rate will have crept up to 3.6% from 3.5% in September in the Labor Department's closely watched employment report on Friday. The Fed increased interest rates by another 75 basis points on Wednesday and warned that further increases in borrowing costs would be necessary to combat inflation.
However, the central bank indicated that the fastest tightening of monetary policy in forty years may be nearing an inflection point.
"The labor market is basically OK, but it does seem to be slowing," said Guy Berger, principal economist at LinkedIn in San Francisco. "The Fed is going to try to thread the needle where they slow down the labor market enough to put downward pressure on wages and inflation, without causing a recession."
According to a Reuters survey of economists, nonfarm payrolls likely increased by 200,000 jobs in October after increasing by 263,000 in September. The payroll increase would be the smallest since December 2020, when COVID-19 infections caused a decline in payrolls. The range of estimates was 120,000 to 300,000.
According to recent trends, employment growth was likely almost evenly distributed among industry sectors, with the leisure and hospitality sector leading the way. The number of jobs in leisure and hospitality is still at least a million jobs below its pre-pandemic level. Financial activities, transportation, and warehousing are interest rate-sensitive industries that are likely to experience job losses similar to those seen in September. Government payrolls are expected to continue to decline.
Payrolls are predicted to have suffered a minor hit from Hurricane Ian. When the government surveyed businesses for last month's employment report, in mid-October, after the storm hit Florida in late September, unemployment claims increased.
"Hurricane Ian should have at least some downward impact on nonfarm payrolls," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. "We have lowered our forecast slightly to show an increase of 150,000 (from 200,000) on the assumption that at least some workers were sidelined in the areas hit hardest by the hurricane."
Because businesses have been replacing workers who would have left, job growth has remained strong despite a decline in domestic demand and an increase in borrowing costs. However, with recession risks rising, this practice may soon come to an end. According to a survey released by the Institute for Supply Management on Thursday, some businesses in the service sector "are delaying backfilling open positions" because of the unstable economic climate.
At the end of September, there were 1.9 open positions for every unemployed person, indicating that the labor market is still tight.
It is anticipated that average hourly earnings will have increased by 0.3%, matching September's gain. But due to Hurricane Ian and a calendar anomaly, there is a chance of an unexpected positive outcome.
Storms and other incidents that prevent people from going to work during the week of the payroll survey, according to Wrightson ICAP's Crandall, can inflate the reported level of hourly wages.
The week that includes the 12th day of the month is when the government surveys businesses and homes.
"The payroll survey week included the 15th of the month, which tends to bias the month/month change higher, since wage increases secured by those workers paid at mid-month and month-end rather than bi-weekly are more likely to have been captured," said Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut.
When weather and calendar irregularities are removed, wage growth is slowing. After rising 5.0% in September, average hourly earnings are predicted to have increased 4.7% annually in October. Additionally, other wage measures have cooled off, which is positive for inflation.
"We believe we've seen wage growth peak," said Michelle Green, principal economist at Prevedere in Columbus, Ohio. "So while we will continue to see year-over-year growth in average hourly earnings across all private sector employees, the velocity of that growth really is starting to slow down."
(Source:www.khaleejtimes.com)
It is also anticipated that the unemployment rate will have crept up to 3.6% from 3.5% in September in the Labor Department's closely watched employment report on Friday. The Fed increased interest rates by another 75 basis points on Wednesday and warned that further increases in borrowing costs would be necessary to combat inflation.
However, the central bank indicated that the fastest tightening of monetary policy in forty years may be nearing an inflection point.
"The labor market is basically OK, but it does seem to be slowing," said Guy Berger, principal economist at LinkedIn in San Francisco. "The Fed is going to try to thread the needle where they slow down the labor market enough to put downward pressure on wages and inflation, without causing a recession."
According to a Reuters survey of economists, nonfarm payrolls likely increased by 200,000 jobs in October after increasing by 263,000 in September. The payroll increase would be the smallest since December 2020, when COVID-19 infections caused a decline in payrolls. The range of estimates was 120,000 to 300,000.
According to recent trends, employment growth was likely almost evenly distributed among industry sectors, with the leisure and hospitality sector leading the way. The number of jobs in leisure and hospitality is still at least a million jobs below its pre-pandemic level. Financial activities, transportation, and warehousing are interest rate-sensitive industries that are likely to experience job losses similar to those seen in September. Government payrolls are expected to continue to decline.
Payrolls are predicted to have suffered a minor hit from Hurricane Ian. When the government surveyed businesses for last month's employment report, in mid-October, after the storm hit Florida in late September, unemployment claims increased.
"Hurricane Ian should have at least some downward impact on nonfarm payrolls," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. "We have lowered our forecast slightly to show an increase of 150,000 (from 200,000) on the assumption that at least some workers were sidelined in the areas hit hardest by the hurricane."
Because businesses have been replacing workers who would have left, job growth has remained strong despite a decline in domestic demand and an increase in borrowing costs. However, with recession risks rising, this practice may soon come to an end. According to a survey released by the Institute for Supply Management on Thursday, some businesses in the service sector "are delaying backfilling open positions" because of the unstable economic climate.
At the end of September, there were 1.9 open positions for every unemployed person, indicating that the labor market is still tight.
It is anticipated that average hourly earnings will have increased by 0.3%, matching September's gain. But due to Hurricane Ian and a calendar anomaly, there is a chance of an unexpected positive outcome.
Storms and other incidents that prevent people from going to work during the week of the payroll survey, according to Wrightson ICAP's Crandall, can inflate the reported level of hourly wages.
The week that includes the 12th day of the month is when the government surveys businesses and homes.
"The payroll survey week included the 15th of the month, which tends to bias the month/month change higher, since wage increases secured by those workers paid at mid-month and month-end rather than bi-weekly are more likely to have been captured," said Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut.
When weather and calendar irregularities are removed, wage growth is slowing. After rising 5.0% in September, average hourly earnings are predicted to have increased 4.7% annually in October. Additionally, other wage measures have cooled off, which is positive for inflation.
"We believe we've seen wage growth peak," said Michelle Green, principal economist at Prevedere in Columbus, Ohio. "So while we will continue to see year-over-year growth in average hourly earnings across all private sector employees, the velocity of that growth really is starting to slow down."
(Source:www.khaleejtimes.com)
