Weekly jobless claims in the U.S. inched higher, suggesting a stable yet gradually softening job market.
With October’s labor slowdown, recent hurricanes and strikes contributed to a dip in job growth, highlighting the workforce’s vulnerability to external shocks.
However, labor costs are climbing, challenging the Fed’s 2% inflation goal and potentially influencing future interest rate decisions.
The Labor Department reported that unit labor costs, a key inflation gauge, surged in the third quarter, reflecting an upward trend alongside an earlier quarter’s upward revision.
Paul Ashworth, chief North America economist at Capital Economics, pointed out that controlling labor costs is vital for managing core service prices.
Initial claims for unemployment benefits rose by 3,000 last week to a seasonally adjusted 221,000, in line with economists’ forecasts.
California, Michigan, and Ohio saw notable increases in filings, which offset declines in states like Florida and Georgia.
October marked one of the weakest job gains since December 2020, with nonfarm payrolls up only 12,000.
The numbers show the impact of disruptions like hurricanes in the Southeast and strikes, such as Boeing’s, which weighed down payrolls.
Still, with factory workers back and storm effects fading, JPMorgan economists project a likely job rebound for November.
Inflation remains center stage. The Labor Department reported that unit labor costs rose at a solid 1.9% annualized rate last quarter, a notable increase from prior estimates.
Recent national accounts revisions revealed stronger income growth, contributing to higher labor costs this year despite a slight 2023 downward adjustment.
Productivity, meanwhile, climbed 2.2% last quarter, supported by steady investments in worker efficiency, especially through technology.
Business leaders, including Gus Faucher, PNC Financial’s chief economist, noted that tech advancements could drive long-term productivity gains.
While Fed Chair Powell suggests inflationary pressure from labor may be easing, economists caution against premature optimism, reminding us that rising labor costs still signal a challenging path for inflation control.
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