A much better-than-expected October jobs report reinforces expectations that the Federal Reserve will raise interest rates in December, as officials are already focused on higher inflation.
The Bureau of Labor Statistics report released Friday showed 165,000 jobs were created in October, compared to about 70,000 expected, while the unemployment rate fell slightly to 4.1%, compared to 4.2% expected. That’s much higher than the average monthly gain of 48,000 over the past 12 months and well above the roughly 30,000 jobs needed to keep employment steady. The activity rate slightly exceeded expectations, at 61.9%.
Employment gains in August and September were also revised upward by 84,000. The majority of jobs created were in professional and business services, health care, and transportation and warehousing. The manufacturing sector created 19,000 jobs.
Even though job creation is accelerating, wage growth remains somewhat moderate in comparison. Wages increased by 3.1% in October, compared to 2.9% expected.
Fed Chairman Kevin Warsh highlighted this dynamic after the last policy meeting, in which the Fed kept rates steady. He noted that payroll growth is significantly ahead of last year’s pace, the four-week rolling average of jobless claims continues to be at its lowest level in generations and that “on the employment side under the Fed’s dual mandate, conditions are quite positive.”
“Yet Americans, of course, still face inflation that has exceeded the Committee’s target for nearly six years,” he said. “It is our responsibility to bring inflation down. That is why the FOMC’s discussions in recent days have focused primarily on the price stability aspect of our mandate.”
Fed officials noted the labor market was stable in recent comments and said job growth was not adding to inflation.
Friday’s jobs report raises the question of whether that could change if labor market growth continues at a faster pace. A report does not show a trend and those responsible are not dependent on the data; they focus on longer-term trends.
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