The latest snapshot of the economy will arrive on Friday morning when the government releases its monthly report on the labor market.
This report will be particularly important because it will offer Americans a final glimpse of the state of hiring, wages and unemployment before the midterm elections. Officials at the Federal Reserve are also watching the numbers closely to assess whether their aggressive efforts to rein in inflation are working, allowing the central bank to dial back its interest rate increases.
Forecasters surveyed by Bloomberg expect that employers added 200,000 jobs last month, a modest decrease from the 263,000 jobs created in September and a further indication that the labor market, though still strong, is cooling.
“The labor market is very tight but we’re beginning to see it soften,” said Sarah House, an economist at Wells Fargo. “When I think about where we are and where we’re going, I feel like hiring is losing altitude but thus far, it’s a controlled descent.”
One possible wrinkle that could skew the numbers is the effect of Hurricane Ian, which clobbered southwestern Florida at the end of September and destroyed countless businesses.
Economists — and the Federal Reserve — will also closely analyze two other data points in the report: average hourly earnings and the labor force participation rate. Both are key to understanding whether the supply and demand for workers are coming into balance. That would give the Fed some confidence that rapid wage growth, which contributes to rising prices, is slowing down.
The central bank’s policymakers on Wednesday raised interest rates another three-quarters of a percentage point, and signaled plans to keep raising them, though perhaps at a slower pace as they attempt to stem the fastest inflation in generations. The Fed’s policy setting committee is next scheduled to meet on Dec. 14.
Economists have been expecting the labor market to weaken as higher interest rates make it more difficult for businesses to grow. So far, however, hiring has been remarkably resilient even as other parts of the economy, like the housing market, have slumped.
Job openings, after falling significantly in August, rose in September to 10.7 million. That increase means there were roughly 1.9 job openings for every unemployed worker. The number of people who quit their jobs — typically a sign that workers are confident they will find better ones — ticked down to 4.1 million but remained high. Layoffs overall have stayed low.
The labor market “is clearly tight enough to support above-average job gains,” said Daniel Zhao, an economist at the career site Glassdoor. “But the question is how much cooling is actually going on. I think it’s a difficult question to answer.”
Stocks and bonds were steady on Friday, as investors waited for fresh data on the labor market that will inform the Federal Reserve’s plan for raising interest rates.
Futures on the S&P 500 rose 0.8 percent in premarket trading, after slumping to a loss every day for the past four days, erasing 4.6 percent of the index’s value for the week. The sell-off accelerated on Wednesday after Jerome H. Powell, the chair of the Federal Reserve, dashed investors’ hopes that the central bank would soon end its campaign of raising interesting rates, which is aimed at slowing the economy and easing inflation.
Despite these efforts, inflation remains well above the Fed’s target of 2 percent, fueled in part by a strong labor market. Investors expect vigorous hiring activity and rising wages to add to the reasons for the Fed to continue raising interest rates, leading to less job growth and potentially pushing the economy into recession.
“The labor market data has come in above market expectations more often than not,” economists at Mizuho wrote in a research report. “The overall picture is that labor demand across the economy remains strong and layoffs remain very low.”
U.S. government bond yields drifted higher on Friday, extending bigger jumps in recent days on expectations of aggressive Fed rate increases. Short-term rates have continued to rise more than long-term rates, deepening a so-called inverted yield curve, which many on Wall Street consider a reliable indicator of impending economic stress.
The fresh numbers on Friday about hiring in October will help set the direction for markets heading into next week, though analysts cautioned that with over a month until the Fed’s next meeting, and with more data set to be released between now and then, it’s unlikely Friday’s report will have too much bearing on what the Fed will do in December.
Federal Reserve officials are worried about a cycle in which inflation could beget more inflation: If workers increasingly push for higher pay to cover the cost of living, it could prompt companies to lift prices to cover the cost of higher wages, Jeanna Smialek reports for The New York Times.
And because the job market is so strong, employees who do not receive satisfying pay gains have more leverage than usual: They can credibly walk away and win better pay elsewhere. Job openings are plentiful, applicants are scarce, and desperate employers may try to lure them with money and benefits.
So far, officials at the Fed have not been under the impression that wage growth has been a driver of inflation. But the report on jobs set for release Friday is likely to show that wages climbed by 4.7 percent over the past year, a pace so quick it could make it difficult for inflation to fade fully.
Some measures of short-term inflation expectations have picked up recently, meaning that people assume prices will continue to go up, at least for a while. That “may be important in the wage-setting process — there’s a school of thought that believes that,” Jerome H. Powell, the Fed chair, said this week. “So that’s very concerning.”