Labor Market Softens in October

Job growth slowed in October as the Fed continues its tightening of financial conditions to fight inflation, but the overall labor market remains tight. The unemployment rate increased by 0.2 percentage points to 3.7% in October as the number of persons in the labor force decreased for the second straight month.

Total nonfarm payroll employment increased by 261,000 in October, following a gain of 315,000 in September, as reported in the Employment Situation Summary. It marks the smallest monthly job gain in nearly two years. The estimate for August was revised down by 23,000, from +315,000 to +292,000, while the September increase was revised up by 52,000, from +263,000 to +315,000. In the first ten months of 2022, nearly 4.1 million jobs were created, and monthly employment growth averaged 407,000 per month.

The unemployment rate ticked up by 0.2 percentage points to 3.7% in October. The number of unemployed persons increased by 306,000 to 6.1 million, while the number of employed persons decreased by 328,000.

Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already with a job, edged down 0.1 percentage point to 62.2% in October, reflecting the increase in the number of persons not in the labor force and the decrease in the number of persons in the labor force. Moreover, the labor force participation rate for people aged between 25 and 54 decreased to 82.5%. Both of these two rates are still below their pre-pandemic levels in the beginning of 2020, and are not fully recovered from the COVID-19 pandemic.

For industry sectors, health care (+53,000), professional and technical services (+43,000), and manufacturing (+32,000) led job gains in October.

Employment in the overall construction sector was little changed (+1,000) in October, following a 22,000 gain in September. Residential construction gained 900 jobs, while non-residential construction employment gained 300 jobs in October. Residential construction employment currently exceeds its level in February 2020, while 83% of non-residential construction jobs lost in March and April have now been recovered.

Residential construction employment now stands at 3.2 million in October, broken down as 904,000 builders and 2.3 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 6,217 a month. Over the last 12 months, home builders and remodelers added 105,300 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,195,000 positions.

In October, the unemployment rate for construction workers rose by 1.0 percentage points to 5.5% on a seasonally adjusted basis. The unemployment rate for construction workers has been trending lower, after reaching 14.2% in April 2020, due to the housing demand impact of the COVID-19 pandemic.

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