US Economy Adds Fewer Jobs Than Expected, Unemployment Rises

The U.S. economy sharply reduced the pace of job creation in October and the unemployment rate rose to the highest level in almost two years, signaling a slowdown in the job market.

Non-farm payrolls rose by 150,000 jobs in October, the Labor Department said in a statement Friday. Economists surveyed by Reuters estimated 180,000 jobs.

The unemployment rate rose to 3.9% from 3.8% in September. Economists expected the rate to remain unchanged.

The report also showed that the data of new jobs for September and August were revised downwards to 297,000 and 165,000 respectively, from the previous readings of 336,000 and 227,000.

The strike of United Auto Workers had an impact in October's numbers. Jobs manufacturing were reduced by 35,000, with 12,000 cuts in transportation and warehousing.

"Job creation came below the consensus forecast but nothing drastic that would suggest at this stage major growth headwinds and labor force damage," economist and former Pimco CEO Mohamed El-Erian, posted on X after the release of the data.

The Federal Reserve decided to keep interest rates unchanged Wednesday. In the statement that announced the decision, the U.S. central bank said that "job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low."

The Fed also said that the current level of interest rates, in the range of 5.25% to 5.5%, the highest in 22 years, is likely to have an impact on economic activity, hiring, and inflation, adding that the "extent of these effects remains uncertain."

Besides a less-heated job market, the new data showed slower wage inflation. Average hourly earnings rose 0.2% on a monthly basis and 4.1% year-over-year, the smallest annual gain since mid-2021.

More Slowdown Signals

Another report released Wednesday showed that job creation by private companies accelerated this month, but still came in below estimates.

New jobs in October totaled 113,000, an increase from 89,000 in September, according to payroll processing company ADP. The number was below the estimate of 150,000 in a Reuters' survey of economists.

The ADP report also showed that annual pay rose 5.7% from a year earlier, after the gain of 5.9% in September. It was the 13th consecutive month of slowdown and the smallest increase since Oct. 2021.

An additional signal of a slowdown in the job market is the number of workers applying for unemployment benefits, which rose for the second week in a row and surpassed economists' expectations.

Initial claims for the week ended Oct. 21 increased to a seasonally adjusted 217,000 from a revised 212,000 in the previous week, the Labor Department said in a statement Thursday. Economists surveyed by Reuters expected a total of 210,000 jobless claims.