WASHINGTON: US businesses reported strong hiring and wage increases in October although the unemployment rate climbed, offering a mixed picture as Federal Reserve officials debate how long to extend their campaign to curb elevated inflation.
Nonfarm payrolls increased 261,000 last month following a gain of 315,000 in September, a Labor Department report showed on Friday. Those figures were derived from a survey of businesses, while one of households painted a weaker picture with higher joblessness, particularly among women.
The unemployment rate increased by 0.2 percentage points to 3.7%, more than forecast, as participation edged lower. Average hourly earnings accelerated from the prior month.
Job gains were relatively broad-based, with categories like healthcare, professional and business services and manufacturing posting solid increases.
The report suggests demand for workers remains robust despite rapid interest-rate increases and a darkening economic outlook. Layoffs, while rising, are still historically low, and competition to fill millions of vacant positions has driven rapid wage gains.
While that has helped underpin consumer spending — the engine of the US economy — it has also made the Fed’s efforts to cool inflation more difficult and suggests the central bank will maintain its resolute tightening campaign in the months ahead.
Fed officials have repeatedly emphasised that in order to meet their inflation goal, they need to bring labour supply and demand more into balance. Chairman Jerome Powell, speaking after the central bank raised rates by another 75 basis points on Wednesday, said that job-market conditions haven’t softened yet in an “obvious” way.
Looking ahead, the most aggressive Fed tightening since the 1980s is set to weigh on hiring. While Powell described the labour market as “very, very strong”, he also said it takes time for higher interest rates to work their way through the economy. He voiced hope that could come about mainly through a drop in vacancies rather than via outright job losses.
The figures also represent the last major economic report ahead of the midterm elections next week. The economy has consistently ranked among voters’ top priorities and will likely be a key factor in whether Republicans take control of the House, Senate or both.
President Joe Biden has repeatedly emphasised the strength of the job market in an effort to show that the economy remains on strong footing despite decades-high inflation and a potentially looming recession.
Friday’s report showed average hourly earnings were up 0.4% from September and were up 4.7% from a year earlier. Even so, many workers’ wages are not keeping up with inflation, something that has started to have an impact on consumer behaviour.
So far, Americans have largely held up in the face of persistently high inflation, but many families are tightening their belts. Credit card companies including Mastercard and Visa saw spending slow in the latest quarter, and Amazon.com is projecting the slowest holiday-quarter growth in its history.
