The latest US Employment Situation report by the Bureau of Labor Statistics (BLS) showed weaker job creation and an unchanged unemployment rate, largely due to weather events and strike activity in manufacturing, according to UOB Group’s Senior Economist Alvin Liew. The report, released on November 1st, revealed that only 12,000 jobs were created in October, the lowest number since December 2020. Despite this, wage growth accelerated above forecasts to 0.4% month-on-month and 4.0% year-on-year, leading to concerns about wage-push inflation.
The job creation in October was not broad-based and primarily driven by government hiring, as the private sector experienced a loss of 28,000 jobs, marking the first negative print since December 2020. Industries such as manufacturing, leisure & hospitality, professional services, retail trade, warehousing & transportation, and utilities all saw job losses during the month. The overall outlook for the US labor market remains uncertain, with the impact of recent events causing disruptions and challenges for various sectors.
Following the release of the October jobs report, expectations for a Federal Reserve rate cut in the upcoming November FOMC meeting have solidified. Market pricing for a 25-basis-point cut is now close to certainty, standing at 98.9%, according to the CME FedWatch tool. This aligns with projections from UOB Group and other market analysts, indicating a high likelihood that the Fed will take action to address the economic challenges highlighted in the latest employment data.
The continued concerns about wage-push inflation, coupled with the uneven job creation and losses across different sectors, highlight the complexities facing the US labor market. While government hiring has provided some stability, the private sector struggles to maintain growth amidst external factors such as weather events and labor disputes. These challenges underscore the need for careful policy decisions from the Federal Reserve to support economic recovery and address key issues affecting employment and inflation dynamics.
As the November FOMC meeting approaches, all eyes will be on the Federal Reserve’s decision and accompanying statements regarding their monetary policy stance. With market expectations already pricing in a rate cut, the focus will be on the Fed’s assessment of the current economic conditions and their plans for supporting growth while managing inflationary pressures. The October jobs report serves as a significant factor in shaping the Fed’s deliberations, highlighting the importance of data-driven decision-making in a complex and evolving economic environment.
Overall, the latest US Employment Situation report paints a mixed picture of the labor market, with weak job creation, concerns about wage-push inflation, and uncertainties surrounding the economic outlook. The upcoming November FOMC meeting will be a critical juncture for the Federal Reserve to address these challenges and provide guidance on future monetary policy actions. With market expectations increasingly tilting towards a rate cut, investors and analysts will be closely monitoring the Fed’s communication and policy decisions to navigate the evolving landscape of the US economy.
