What can you expect from Friday’s jobs update?

The Bureau of Labor Statistics will release its monthly jobs report Friday. All eyes will be on the Labor Market. This is one of the key factors that will help determine the Federal Reserve’s next steps in fighting decades-high inflation.

According to the US economy, September will see 250,000 new jobs. This would mark the lowest monthly job gain since December 2020. According to Refinitiv estimates, the unemployment rate will remain at 3.7%.

August jobs data showed that the historically tight labor market has eased a bit. America added 315,000 jobs in August, which was lower than the 512,000 average job gains for the past twelve months. According to the Jobs Openings and Labor Turnover Survey, Tuesday’s report showed that the number of available positions fell by 1.1million, the largest monthly drop outside of the pandemic.

Although first-time claims for weekly unemployment benefits were at a four-month low on Thursday, they rose again on Thursday. According to data released by the Department of Labor Thursday morning, 219,000 first-time claims for unemployment benefits totaled 219,000 in the week ending October 1. This is an increase of 29,000 or 15% over last week’s revised level of 190,00,000.

Weekly initial jobless claims numbers can be subject to substantial revisions. The week ended September 24, saw 1.36 million continuing claims, a 15,000 increase over the revised week prior.

According to the most recent report by Challenger Gray & Christmas, job cuts have been trending higher in recent months. US companies announced plans to reduce 29,989 jobs in September. This is a 46% increase over August and nearly 68% more than the time last year. Challenger stated that nearly one-third of the reductions were in the retail sector.

“Some cracks are starting to appear in the labor marketplace. Andrew Challenger, Challenger, Gray & Christmas senior vice president, stated in a statement that hiring is slowing down and that downsizing events have begun to happen.

However, the headline jobs number, which is highly anticipated, is now falling. But, BLS data shows that it’s still strong. Before the pandemic, the monthly average was approximately 200,000.

Also, the September employment report will reveal that the average hourly earnings growth slowed to 5.1% in September from 5.2% in August. The Fed closely monitors whether a slower demand for workers will also dampen wage growth, or whether wages remain high to keep inflation at bay.

Nick Bunker, Indeed Hiring Lab’s head of economic research, stated that the labor market reached 11 last year and is now at 9. Although things have declined, it is still quite loud.

“A slow grind”

The Fed’s goal to achieve a soft landing, which is cooling inflation and not causing the recession, has become increasingly impossible.

According to Fed projections, this could lead to an increase in unemployment from 3.7% to 4.4% by next year. According to BLS data, an increase in unemployment, even if there is no change in labor force participation, would lead to at least a 1.2million workers losing their jobs.

Economists warn that even if there were more workers in the workforce, it may not be enough to offset this imbalance.

Alex Pelle, the US economist at Mizuho Securities, stated that “it would be wonderful if we had a soft landing and [job] opportunities did all the work and inflation expectations did the work and there was very little economic pain.” It is possible, but it is not likely.

Despite the persistently high demand for workers, especially in industries that were hit hard by the pandemic and subsequent sharp recovery, labor force participation rates remain stubbornly low at pre-pandemic levels.

This is mainly due to continuing demographic trends such as the large Baby Boomer generation retiring from the workforce, acceleration of retirements during pandemics, and others remaining on the sidelines because of reasons like caregiving and restrictive immigration policies.

Despite these demographic pressures, the unemployment rate will likely rise. This would likely be due to people losing their jobs.

Pelle stated that “it might be a slow grind.” It’s not going to be a pleasant slog. It won’t be an easy, slow grind.

When Fed policymakers meet in November to discuss ways to curb stubbornly high inflation, they will be reviewing the September jobs report as one of the key economic data. The Fed has been fighting rising prices with a series of high-interest rate hikes.

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