The growth in jobs was stubbornly strong in October, running contrary to the Fed’s policy of higher ... [+]
The October jobs report has to be viewed differently compared to last year at this time. Job growth is not the desired outcome by Federal Reserve Bank chair Jerome Powell. His mission is to fight back against a record 40-year high inflation rate. While job creation and a strong labor market are typically favorable, Powell sees this as anathema to his policy. He needs to dampen employment to bring down runaway inflation.
The Fed aggressively raised interest rates to slow down the economy and curb inflationary growth by cooling down the labor market and muting wage increases that contribute to higher consumer prices. However, the growth in jobs was stubbornly strong in October, running contrary to the Fed’s policy of higher interest rates.
October Jobs Report
Payroll employment increased by 261,000 in October, while unemployment ticked higher to 3.7%, the Bureau of Labor Statistics reported Friday. There were job gains in healthcare, professional and technical services and manufacturing. The economy grew at a 2.6% annual rate in the third quarter, but showing some signs of a slowdown.
The number of unemployed people rose to the highest level since February, and there were 306,000 more unemployed workers in the U.S. in October, the second biggest increase since the start of the pandemic.
The Department of Labor gathers data from two separate surveys: households and employers. The household survey showed a 328,000 decline in employment, contributing to the rise in the unemployment rate. The employer survey showed that hiring rose.
The U.S. job openings increased to 10.7 million in September up from 10.3 million in August. This was lower than the zenith of 11.9 million in March. Although there is a significant amount of jobs available, it seems that businesses are finding it hard to recruit and onboard workers. To entice people to accept a new job, wages and salaries need to increase. Average hourly earnings grew 4.7% from a year ago, which runs counter to Powell’s program.
The Fed initiated its fourth consecutive 0.75 percentage point interest rate increase this week, stoking benchmark borrowing rates to a range of 3.75% to 4%. The interest rate increases were imposed to cool the job market and will continue until there are signs of inflation abating.
Notable Layoffs In October
- Peloton reduced its headcount for the fourth time this year. The latest round impacted 500 employees—12% of its workforce.
- Oracle recently cut 201 employees in its second round of layoffs this year.
- Beyond Meat plans to cut 19% of its staff.
- Hello Fresh closed a California production facility and laid off 611 of its workers.
- Microsoft cut nearly 1,000 jobs across multiple divisions.
- Delivery startup Gopuff laid off around 250 workers in its third round of cuts this year.
- Tech-giant Philips cut about 4,000 jobs—more than 5% of its workforce.
- Online real-estate platform Zillow cut 300 jobs in its second round of 2022 layoffs.
- Credit Suisse announced that it plans to trim 9,000 jobs by 2025, Bloomberg reported.
November Shows Continuing Layoffs And Hiring Freezes
- Elon Musk, Twitter’s new CEO, plans to cut nearly half of the social media platform’s staff, according to reports. The layoffs are set to happen starting Friday.
- Lyft is cutting 13% of its workforce—approximately 500 people. This will be the second round of layoffs for the ridesharing company this year, according to the Wall Street Journal.
- Digital bank Chime is laying off about 160 people—12% of its staff, a spokesperson told CNBC.
- Digital payments giant Stripe is cutting 14% of its workforce, CEO Patrick Collison wrote in a staff memo. The layoffs will impact more than 1,000 employees.
- Real-estate platform Opendoor is cutting 550 jobs—18% of its workforce—CEO Eric Wu announced in a blog post.
- Oracle, the world’s largest database management company, laid off as many as 200 employees in its cloud infrastructure unit on November 1. This comes a week after the company "quietly" laid off workers in another cloud division, according to Business Insider.
- According to the Information, Gem, the San Francisco-based software management platform, let go of 100 employees—one-third of its workforce.
- Amazon has placed a hiring freeze on corporate roles, Beth Galetti, the company’s senior vice president of people experience and technology, wrote in a blog post.
- Apple has paused “almost all hiring,” and the freeze could last through September 2023, Business Insider reported.
