The employment data underscores our call that the Fed has reached the peak in its rate hike cycle as it works to restore price stability.
The economy added 150,000 jobs in October with the unemployment rate at 3.9%, the Bureau of Labor Statistics reported on Friday. Those figures, coupled with the downward revision of 101,000 jobs to initial estimates of hiring over August and September, reaffirm the Federal Reserve’s recent decision to hold rates steady. The employment data underscores our call that the Fed has reached the peak in its rate hike cycle as it works to restore price stability. It is important to note that the economy needs to add only 75,000 jobs a month—compared with 200,000 a decade ago—to stabilize employment given demographic changes that have led to a slower annual pace of growth of 0.5% in the workforce. From out vantage point, the 150,000 gain in total employment and an unemployment rate in line with the 4% that we think is consistent with full employment is to be celebrated. The Bureau of Labor Statistics indicated that manufacturing employment was dragged down by 33,000 workers laid off because of the United Auto Workers strike. But these workers will return to the workforce in the next month, implying that the top-line figure modestly understates the pace of hiring and affirms a rock-solid American labor market. At a certain point, we think the false dichotomy between recession and soft landing will fade. Instead, we will be talking about an expanding economy that is capable of growing at a faster pace with lower inflation than is commonly acknowledged, bolstered by a pace of productivity that will push living standards higher.