Following a September gain of 315,000 that had been upwardly revised, nonfarm payrolls grew by 261,000 last month, according to a Labor Department data released on Friday. Those figures were derived from a survey of businesses, while one of households painted a weaker picture with higher joblessness.
More than expected, the jobless rate rose by 0.2 points to 3.7% as participation slightly declined. Hourly wages increased on average from the previous month.
In a Bloomberg survey of experts, the median forecast predicted a 193,000 increase in payrolls and edging up of the unemployment rate to 3.6%.
Job gains were relatively broad based, with categories like health care, professional and business services and manufacturing posting solid increases.
According to the survey, despite swift interest rate increases and a gloomier economic outlook, there is still a strong need for employment. Although they are on the rise, layoffs are still historically low, and pay growth has been accelerated by the competition to fill the millions of open positions.
That has supported consumer spending, which is the backbone of the economy, but it has also made the Fed's efforts to control inflation more challenging. This suggests the Fed will continue its steadfast tightening campaign in the months to come.
Officials from the Fed have highlighted numerous times that in order to achieve their inflation target, they must better balance the supply and demand of labour. After the central bank increased rates by another 75 basis points on Wednesday, chair Jerome Powell stated that the job market circumstances have not yet changed in a "obvious" way.
Treasury yields increased, the S&P 500 index futures held steady, and the dollar slightly declined. The Fed's pace of tightening is still expected to slow to 50 basis points in December, according to traders.
Looking ahead, the most aggressive Fed tightening since the 1980s is set to weigh on hiring. While Powell described the labor market as “very, very strong," he also said it takes time for higher interest rates to work through the economy.
Powell expressed optimism that rather than a net loss of jobs, there would be a decline in the number of openings.
The results also serve as the final significant economic report prior to next week's midterm elections. This season, the economy has constantly been among voters' top concerns, and whether Republicans take control of the House, Senate, or both will likely depend heavily on this.
In an effort to demonstrate that the economy is still on solid ground despite decades-high inflation and a possibly impending recession, President Joe Biden has repeatedly underlined the robustness of the labour market.
According to the statistics released on Friday, average hourly wages were up 0.4% from September and 4.7% from a year earlier. However, many workers' pay is not keeping up with inflation, which is starting to affect consumer behaviour.
Americans have thus far mostly survived despite the ongoingly high inflation rate, but many families are reducing their budgets. Amazon.com Inc. is forecasting the worst holiday-quarter growth in its history, and credit card issuers like Mastercard Inc. and Visa Inc. observed sluggish spending in the most recent quarter.
Tech and real estate sectors, which are more vulnerable to interest rate increases, are already suffering the effects of the Fed's stricter monetary policy. While Amazon has essentially stopped hiring for new positions across the board, Apple Inc. has paused hiring for a few of positions outside of research and development. In the midst of the severe decline in the housing market, Opendoor Technologies Inc. and Zillow Group Inc. have laid off employees.
(With inputs from Bloomberg)
