The U.S. added 261,000 jobs in October and the unemployment rate rose slightly to 3.7 percent, according to data released Friday by the Labor Department.
Economists expected the U.S. to add roughly 190,000 jobs last month and keep the unemployment rate steady at 3.5 percent, according to consensus estimates.
While the overall jobs gain was better than anticipated, the labor market showed other signs of slowing under the weight of high prices, stubborn inflation, rising interest rates and a weakening global economy.
“Over the last few months, the job market has consistently signaled that it is cooling,” Daniel Zhao, senior economist at Glassdoor, wrote in a Friday analysis.
“There’s still room for jobs growth to cool before red flags are raised about the health of the labor market.”
The jobless rate rose in October as 306,000 Americans joined the ranks of the unemployed, while labor force participation stayed flat. Wage growth also slowed to an annual increase of 4.7 percent, down from 5 percent in September and 5.2 percent in August.
Even so, the unemployment rate is still just 0.2 percentage points above its pre-pandemic level and the U.S. has continued to add jobs at a strong pace. The numbers of Americans who were laid off or dropped out of the labor force for other reasons have also remained low.
Economists have expected the U.S. job market to weaken from the historically strong levels since throughout 2021 and earlier this year. The U.S. has added roughly 400,000 jobs each month since the start of the year, and there are still nearly two open jobs for each unemployed American.
“The job market remains historically tight,” wrote Julia Pollak, chief economist at ZipRecruiter, in a Friday analysis.
“Job gains remain about 60% larger and substantially more broadly distributed across industries than before the pandemic. The pace of gains is only very gradually edging back to normal.”
The strength of the job market has helped millions of Americans recover from their financial losses during the COVID-19 recession, created rapid wage growth and helped untold numbers of workers find new careers with better pay and compensation.
But many economists believe the historically strong job market has also pushed inflation higher, prompting the Federal Reserve to hike interest rates with the goal of slowing it down.
The Fed is hoping to bring inflation down by slowing the economy and weakening the job market enough to make households and businesses spend less money, but without causing a recession.
If the pattern of the October jobs report holds up — solid job gains, but less demand for workers — it may be possible for inflation to come down without the Fed raising rates high enough to cause a recession. While Fed Chairman Jerome Powell said Wednesday the window for doing so is possible, other experts say it’s not too late for the U.S. to avert a crash-and-burn recession.
“Right now, the Fed is trying to land the economy while grappling with an updraft from the hot labor market,” Zhao, of Glassdoor, said.
“While the strong labor market helps prevent the economy from slamming into the ground, eventually the economy could run out of runway.”
Updated at 9:14 a.m.