October jobs report: Growth likely, but threats come with Fed interest increases
November 1, 2022
On Friday, the U.S. Bureau of Labor Statistics will release employment figures for the month of October. The following Cornell University experts are available for interviews.
Erica Groshen, senior economics advisor, is a labor statistics expert. She was also the former commissioner of the U.S. Bureau of Labor Statistics and vice president of the Federal Reserve Bank of New York.
“The two most recent jobs reports showed a slight cooling in private sector job creation in August and September. Although the pace was still high (+275,000 jobs in August and +288,000 in September), the economy created jobs very quickly during the first half of the year – at an average pace of +430,000 per month.
“Some thoughts on factors likely to affect job growth or layoffs in the coming months:
- The Federal Reserve tightening of monetary policy has raised interest rates substantially, which affects interest-sensitive parts of the economy (real estate, construction, durable goods, etc.). This effect is starting to slow activity measures for these sectors but has not been apparent in jobs yet.
- Inflation is reducing real wages and consumer spending power. Unusually, the real wages of lower income workers have risen over the past year – those of higher income workers have fallen. Thus, the impact on consumption may not be strong if inflation starts to subside because of the slowing economy.
- Early 2022 job growth rates are not sustainable for much longer. Job growth remains above the long run growth rate for the working age population in the U.S. and the unemployment rate is very low by historical standards. Thus, even without tighter monetary policy, it is likely job growth would be slowing now.
- In the event of a recession, employers could break with the strong pre-Covid pattern of permanent layoffs during recessions of the last four decades. They may choose to retain workers via furloughs or cutting hours so as not to face the shortages they just dealt with.
- We should not forget the continuing pandemic. A new surge of cases, hospitalizations, and deaths would also slow growth, although it would not lead to mass shutdowns again because we now understand its transmission, have vaccines, and can treat it more effectively.”
Russell Weaver is an economic geographer with Cornell University’s ILR School Buffalo Co-Lab.
“New data released on November 1 revealed that counter to expectations of contraction, the number of job openings in the U.S. economy increased during September. This Friday, the monthly jobs report from the Bureau of Labor Statistics should bring more positive employment news, by showing a net growth of around 200,000 jobs during October.
“Whereas this level of growth represents a continuation of the economic slowdown that began taking shape late in the summer, it comes as the Federal Reserve has been steadily raising interest rates in an attempt to curb inflation. Higher interest rates can stall job growth and put upward pressure on unemployment in the short run. The slowing-but-steady net employment gains that have occurred so far this fall, despite rate increases, are therefore welcome signs that the Fed’s moves haven’t cut too deep – at least not yet – as the labor market remains relatively strong.
“However, rates are expected to rise by another 0.75 percentage points later this week. As some have cautioned, Friday’s job report may contain additional evidence that doubling down on such aggressive rate increases could undermine the current strength of the labor market and raise the threat of recession.”