Why the Unemployment Rate Just Went Up

Why the Unemployment Rate Just Went Up

By Yuval Rosenberg and Michael Rainey
Friday, November 4, 2022

Welcome to the weekend. Here’s what we’re watching while we wait for the winning Powerball numbers.

Unemployment Rate Rises, but Job Market Keeps Chugging Along

Employers added 261,000 jobs in October, the Labor Department announced Friday, surprising analysts who were expecting to see a number about 20% lower. At the same time, the monthly increase was the smallest since late 2020 and below September’s upwardly revised 315,000, indicating some degree of cooling in the labor market.

The unemployment rate went up: Despite the stronger-than-expected results, the unemployment rate rose to 3.7%, up two-tenths of a percentage point from a 50-year low. The separate household survey used to calculate the unemployment rate showed a decrease in the total number of jobs, with employment falling by 328,000. The labor force shrank slightly, too, decreasing by 22,000, with the labor force participation rate slipping from 62.3% to 62.2%.

Average hourly pay rose 0.4% on a monthly basis and 4.7% on an annual basis — a substantial annual increase, but one that is below the 16-year peak of 5.6% recorded in March and below the rate of inflation, leaving workers worse off on average.

What it means: Overall, job growth is slowing but is still quite vigorous. "The report points to a labor market that remains strong despite some recent signs of cooling following the Federal Reserve’s aggressive pace of interest rate increases," The Wall Street Journal’s David Harrison said.

Mixed signals: Reporters and analysts highlighted the mixed results in the report, with Bloomberg’s Augusta Saraiva and Vince Golle saying that it shows "a job market that’s cooling albeit not very quickly."

"The labor market’s going from 100 miles per hour to 85," economist Rob Dent of Nomura told the Journal. "The Fed’s looking for 40, and we’re still not very close to that," he added, referring to the Federal Reserve and its aggressive campaign to slow the economy and reduce inflation.

Bloomberg economists Anna Wong, Andrew Husby and Eliza Winger said the report "sends mixed signals about the labor market, with one survey showing robust job gains while another shows a big jump in unemployment. Filtering the noise in the data, our takeaway is that the labor market is still very tight and much adjustment still needs to occur before unemployment is close to a neutral level."

White House emphasizes market strength: In a statement, President Joe Biden said the October report "shows that our jobs recovery remains strong," adding that "the US economy continues to grow and add jobs even as gas prices continue to come down."

Jared Bernstein, a member of Biden’s Council of Economic Advisers, told Politico that the jobs report suggests that the economy is nowhere near a recession: "This economy has been incredibly resilient to every damn thing you want to throw at it, and I see no reason that won’t continue."

Economist Betsey Stevenson of the University of Michigan, who served as an adviser to President Barack Obama, said the report reflects robust conditions in the labor market that are hard to square with the idea of an impending slowdown. "Employers continue to be worried that it’s going to be harder to hire tomorrow than today, so that actually suggests they don’t see a recession on the horizon," she told the Associated Press.

The bottom line: Another data point telling us that the labor market is still booming, with little to suggest that the Federal Reserve will soon pause its campaign to tighten monetary conditions in the economy. "This report was definitely strong enough to keep the Fed on track raising rates," UBS economist Jonathan Pingle told the Associated Press.

‘Committed to Ukraine for as Long as It Takes’: Pentagon Announces Another $400 Million in Aid

The Defense Department announced Friday that it will provide another $400 million aid package for Ukraine. The assistance includes, for the first time, funding to refurbish 45 tanks from the Czech Republic. It also includes 1,100 drones, 40 armored boats and money to refurbish air defense missiles and armored vehicles. The Netherlands will provide another 45 refurbished tanks.

The Pentagon also said it is establishing a new command in Germany called the Security Assistance Group-Ukraine to oversee weapons transfers and training for the Ukrainian military. The new command, which will include about 300 personnel, "signals that the United States expects the threat from Russia to Ukraine and its neighbors to persist for many years," The New York Times notes, citing current and former senior U.S. officials.

"We remain committed to Ukraine for as long as it takes," Sabrina Singh, deputy Pentagon press secretary, told reporters.

White House National Security Council spokesman John Kirby told reporters that the administration will continue to work with Congress to secure military and economic aid to Ukraine even as some Republicans have criticized the idea of providing additional funding. Right-wing Rep. Marjorie Taylor Greene (R-GA), for example, said Thursday that if Republicans win control of Congress in next week’s midterm elections, "not another penny will go to Ukraine."

The U.S. government has committed more than $18.9 billion in military assistance to Ukraine under President Joe Biden, including more than $18.2 billion since Russia’s invasion began on February 24.

In all, Congress has approved roughly $66 billion in assistance to Ukraine and related spending.

Mark Cancian, a defense expert at the Center for Strategic and International Studies, told Reuters recently that the total U.S. cost for the Ukraine war is relatively small compared to the Pentagon’s $800 billion annual budget and the value of promoting democracy and stability in Europe. He noted that the cost would be far higher if American troops were doing the fighting. "Many strategists — and I would put myself among them — would say this is a reasonable amount of money and it's cost-effective," he said.

Republicans Press Amtrak on ‘Inappropriate, Wasteful and Disrespectful’ Bonuses

Two Republican lawmakers are looking for some answers from Amtrak after The New York Times reported in August that the rail service paid out some $2.3 million in bonuses to top executives in fiscal 2021, including awards of more than $200,000 to nine executives.

In a letter to the chairman of Amtrak’s board of directors, Reps. Sam Graves (R-MO) and Rick Crawford (R-AR) write that the bonuses were paid despite "dismal performance by the company," including adjusted operating losses of $789 million for fiscal year 2020 and $1 billion for fiscal year 2021.

"Payment of lavish executive bonuses when Amtrak services and revenues remain below pre-pandemic levels, and financial losses appear permanent, seem inappropriate, wasteful and disrespectful to Amtrak’s nonexecutive front-line employees and taxpayers," the congressmen, both members of the House Transportation and Infrastructure Committee, wrote.

Amtrak reportedly says that the bonuses were based on metrics such as ridership, customer satisfaction and financial results. "To earn incentives, Amtrak must achieve a high level of corporate performance in support of our company’s strategic plan — and employees must also meet their individual performance goals," a spokesperson told the Times.

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