Is America Headed for Layoffs?

America could be heading for layoffs as jobs numbers, which have been tight in recent months, showed some softness.

The unemployment rate ticked up slightly in October on the back of some layoffs even as employers added 150,000 jobs overall for the month, data from the Bureau of Labor Statistics (BLS) showed on Friday, much lower than the revised 297,000 figure from the previous month, a sign that the hot labor market may be cooling.

Analysts had expected hiring to come in at 180,000, according to a Bloomberg survey. The October numbers were below the average monthly gain of 258,000 jobs over the previous 12 months, the BLS said.

The unemployment rate rose to 3.9 percent, the data showed, from the September 3.8 percent figure.

"The uptick in the unemployment rate, it looks like it was really driven by two trends. First permanent layoffs, people who lost their jobs and those jobs disappeared and second, new entrants," Aaron Terrazas, chief economist at Glassdoor, told Newsweek. "It was the largest number of new entrants to the jobs market, going all the way back to September 2019."

While the unemployment rate rose, it was still low by historical standards.

"Layoffs are definitely up a little bit but overall, I would say this is kind of a solid report with underlying weakness," Karin Kimbrough, chief economist at LinkedIn, told Newsweek. "There's not any reason to think that the economy is suddenly a lot weaker than we thought. We still have a very solid amount of job gains."

The gains in jobs for October occurred in health care, government, and social assistance. Manufacturing saw a decline due to "strike activity," the BLS pointed out.

The government agency said that the September numbers had been revised down from 336,000 to 297,000. For August, the revisions were minus 62,000.

"With these revisions, employment in August and September combined is 101,000 lower than previously reported," the BLS said.

President Joe Biden Pleased

President Joe Biden was buoyed by the October hiring numbers.

"Today's report shows that Bidenomics is growing the economy from the middle out and bottom up—not the top down," he said in a Friday statement. "American workers have achieved these gains while inflation has fallen by 60% and core inflation is at its lowest level in two years—defying projections that it would take a sharp increase in unemployment to bring inflation down."

Biden also called on congressional Republicans to work with him.

"Republicans in Congress should join me in growing the economy and reducing inflation—rather than making reckless threats to weaken our economy or prioritizing more tax cuts for the wealthy and large corporations over essential programs for hardworking families, seniors, and our national security," he said.

Newsweek reached out to the office of House Speaker Mike Johnson for comment via email.

What the Jobs Report Means for the Fed

The Federal Reserve will be keenly watching how the jobs market has performed in their battle against inflation ahead of their next gathering in December. With employers still hiring, consumers have kept spending and in turn kept prices elevated.

On Wednesday, Fed policymakers held the rate at the current two-decade high of 5.25 to 5.5 percent. The hike in rates which began in March 2022, has pushed up borrowing costs for mortgages to their highest since the turn of the century and made the cost of capital more expensive, slowing business investment in the process.

While the October job numbers showed that employers were still hiring, the pace of recruitment appears to be slowing.

It adds to recent signals that suggest that employers are still looking to hire, albeit at a reduced pace. This week's data showed that job openings ticked up and companies hired more than 110,000 people in October, despite an environment of high interest rates and elevated prices.

Consumer spending has been a key driver in the U.S. economy, which has shown remarkable resilience despite headwinds of strikes, record interest rates, the resumption of student loan repayments and geopolitical conflict in Ukraine and the Middle East. In the three months through September, the economy expanded by 4.9 percent, beating expectations.

Fed chair Jerome Powell indicated on Wednesday that policymakers needed to see "below potential growth" that will lead to a slowdown of inflation down to their 2 percent target. As of September, inflation stood at 3.7 percent, down from its 40 year high of 9 percent last year, according to the BLS.

"We know that if we fail to restore price stability, the risk is that expectations of higher inflation get entrenched in the economy and we know that's really bad for people. Inflation will be both higher and more volatile. That's a prescription for misery," Powell said Wednesday. "So we're really committed to not letting that happen."

Inflation May Be Tamed

For the Fed, some of the trends revealed in the October report could be encouraging that their efforts to slow down the economy to bring inflation to its target may be working.

Wage growth, a key driver of consumer spending, rose slightly by 0.2 percent to $34, but this appeared to be a deceleration from the trend over the last year. "Over the past 12 months, average hourly earnings have increased by 4.1 percent," the BLS pointed out.

Nevertheless, there was still work to be done, according to economists, ahead of the Fed's meeting in December.

"They still need to see inflation come down," Kimbrough told Newsweek.

But they may be encouraged by the signals the economy is showing them.

"Wage growth easing and they see people working a little bit less, shorter work weeks slowing in wage growth and so that means the Fed is going to be a little less worried about inflationary pressures coming from wages," she added. "Overall, I would say it's a step in the right direction for the Fed, but it's not enough to change their mind on anything just yet."

Mortgage lenders suggested that while hiring showed weakening, the job market continued to "fare reasonably well."

"While the job market remains generally resilient, inflation is still the key metric for the Fed as it weighs the policy path over the next few months," Joel Kan, the Mortgage Bankers Association's chief economist, said in a statement to Newsweek. "We continue to expect them to hold the Fed funds rate at its current level until 2024, when their next rate move is likely to be a cut."

For Terrazas, the jobs report may still be too strong for the Fed to start to think they have completed their job.

"If you add in the striking workers, payroll growth is probably closer to the 200,000 range. That is not a weak jobs market. That is a strong job market," he told Newsweek. "Sure, the unemployment rate is increasing slightly. Wage growth is slowing far too slowly. You know, look past the cloudy payroll numbers, and this was a really strong report."