U.S. Jobs: October Employment Numbers Hint at a 'Goldilocks Zone'

For a while there, the Federal Reserve Board was getting concerned that inflation and job growth were both strong. Wages started growing more and faster, too. Combined, these factors threaten the soft landing that the Fed has been trying to engineer in the 20-plus months since we climbed out of the worst of the pandemic.

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Interestingly, the October Employment Situation summary puts things into a somewhat Goldilocks-like perspective. Let me explain.

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Searching for Baby Bear's Porridge

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In the jobs added arena, job growth continues — which indicates that the economy remains robust. That said, it grew by around 150,000 jobs in October, or just over half of the revised 297,000 jobs created in September. That's down 39,000 from last month's report; August also got revised downward, by 62,000 to 165,000. Thus the trailing three-month average is 204,000.

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That shows cooling in the jobs market, but without provoking alarm (or a freeze warning). And please note: This occurred in a month where UAW workers (up to 50,000 of them in total, according to CNN) were on strike. The U.S. Bureau of Labor Statistics did allow for 33,000 in strike-related jobs losses in this latest report.

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Whatever their status was then, the UAW has suspended its strike against the big three automakers, so they're back at work now. That will nudge November's numbers a bit more as a result.

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On the unemployment side of things, that number crept up from 3.8 percent to 3.9 percent. It's been on a steady but languid rise since plunging to a recent (and historic) low of 3.4 percent last April. Anything lower than 4 percent has long been considered "full employment" in the U.S. jobs market.

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Nothing about the October numbers, nor indeed anything since December 2021, appears to suggest that either spikes or dips are surely in the offing. The Fed can take heart that despite its numerous rate hikes (11 of them since March 2022: 5 at 0.25 percent, 2 at 0.5 percent, 4 at 0.75 percent) unemployment hasn't spiked (nor indeed been strongly affected, as far as the numbers show).

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Wage growth, which had been stepping along smartly of late, eased to a modest 0.2 percent for October with private nonfarm payroll hourly rates up by 7 cents to a round $34.00. Wage growth over the trailing 12-month period stands at 4.1 percent (down a mere 0.1 percent from September, but still showing signs of cooling).

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There is little difference there, but it shows that concerns about runaway wage growth — a strong indicator of inflationary pressure — need not weigh too heavily on economists, regulators and financial strategists of all stripes.

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And finally, there's inflation. The latest month for which inflation stats are available, as measured by the Consumer Price Index (CPI) is September 2023. It came in at 3.7 percent, below the rate of wage growth. It's still nowhere near the Fed's 2 percent target, but it's less than half its peak values in the 8-to-9 percent range last year. And it's slowly find its way down, despite an occasional (small) hiccup here and there.

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All in all, the picture is mostly along the lines of "move along; nothing to see here." Things are largely humming along with neither too much strength nor weakness in any of these major indicators. This explains my use of the "Goldilocks zone" terminology: something planetologists use to describe heavenly bodies that are neither too far (and thus, too cold) or close (and thereby too hot) to support life as we know it in orbit around some star.  

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A Closer Look at the Numbers

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Given all this encouraging blather, what do the numbers in the latest Employment Situation Summary actually say? Let me report the October 2023 data briefly: The October 150,000 number is about 58 percent of the 12-month trailing average of 258,000 jobs. That's clearly trending downward (and validated by the 3-month trailing average of 204,000, down by 21 percent).

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Here's a look at how specific sectors performed:

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Healthcare comes in as the big dog in those results, with 58,000 jobs added (and a little over its 12-month trailing average of 53,000). Of that total, ambulatory health care added 32,000 jobs, and nursing and residential care facilities another 8,000 jobs.

Government wasn't far off that mark, with 51,000 jobs added. The report observes that this sector "has returned to its pre-pandemic February 2020 level." Most of that total went to local government jobs: 38,000.

Social assistance grew by 19,000 jobs, a little below its 12-month trailing average of 23,000 jobs. Of that total, 14,000 jobs went to individual and family services.

Construction nailed up 23,000 jobs, a little over its 18,000 12-month trailing average. Specialty trade contractors accounted for 14,000 of those jobs, with building construction notching up another 6,000 jobs.

Leisure and hospitality served up 19,000 jobs for the month, well below its 12-month trailing average of 52,000 jobs. Not much change here, in other words. That is likely to increase in November and December with the added needs to cover the holiday rush.

Professional and business services increased by 15,000 jobs, but shows little motion up or down since last May. Temporary help added 7,000 jobs, but remains more than 200,000 below its March 2022 peak level.

Manufacturing dropped by 35,000 jobs in October, most resulting from the UAW strike (this accounted for 33,000 of that loss).

Transportation and warehousing lost 12,000 positions, but is mostly flat in 2023. Warehousing and storage accounted for most of that number (-11,000), though air transport added 4,000 jobs.

Information (our home sector) declined by 9,000 jobs. 5,000 of this was in motion picture and sound recording (the actors are still on strike and production is way, way down right now). The report notes that "the industry [motion picture and sound recording] has lost 44,000 jobs since May(.)"

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Other sectors that U.S. BLS tracks are mostly flat, including mining, wholesale and retail trade, and financial activities.

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Will There Be a Holiday Effect in 2023?

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Most economists and market watchers often speak of a holiday effect near the end of each calendar year. As people buy gifts, put on the ritz, and otherwise whoop it up for the end-of-year holidays, this typically buoys the jobs and financial markets alike. Here's hoping that Santa will leave everybody some goodies as the year winds down, and that 2023 exits on an upward note.

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Stay tuned: I'll tell you what I think as those reports come out.