U.S. job growth slowed for the second month in a row.
The Department of Labor on Friday said total nonfarm payroll employment rose by 263,000 in September, slightly better than the 255,000 economists expected but lower than Citigroup’s 265,000 forecast and Nomura’s 285,000. The increase was also below the 315,000 jobs created in August, and trailed the average of 420,000 added each month this year. Moreover, the labor force participation rate slipped to 62.3 percent from 62.4 percent in August. And while many expected the unemployment rate to hold steady at 3.7 percent, it fell to 3.5 percent last month.
While job gains were visible in most industries, particularly in leisure and hospitality and health care, the labor department said “employment showed little change over the month” in sectors such as retail trade, other services and government.
The industry has been moving in this direction. Walmart has been rolling out high-tech automation systems. On Thursday, it announced plans to acquire e-grocery fulfillment provider Alert Innovation. In September last year, it said it was adding 20,000 workers to its supply chain. Walmart recently filed a Georgia Worker Adjustment and Retraining Notification stating it plans to cut 1,458 jobs, effective Dec. 2, at its Atlanta e-commerce fulfillment center as it transitions to a Walmart Fulfillment Services business support site. The retailer in August also announced 200 corporate layoffs.
Tech investments speed up order processing and delivery times while reducing labor needs. Last month, Walmart reported plans to hire just 40,000 holiday workers, 73.3 percent less than last year. Many job seekers choose seasonal retail work with the hope of going full-time. Target, by contrast, is recruiting 100,000, on par with last year, while Macy’s, Kohl’s and Amazon are also staffing up. Dick’s Sporting Goods, which hired 9,000 temporary employees for the holidays, plans to hire 1,000 fewer than in 2021.
The sector is poised to see continued changes. Retailers from Walmart to Kohl’s have been investing in self-checkout to give shoppers convenient options. Some Five Below locations only have self-checkout, with just one retail associate stationed to assist customers with technical difficulties. H&M is also rolling out self checkout to more markets.
But even with those changes at retail, which represents about 25.8 percent of U.S. employment, the current job market is still considered to be in a good place.
According to The Conference Board senior economist Frank Steemers, the labor market remains “very tight,” even if there are signs of cooling. He noted that there are no clear signs yet of increasing layoffs, although that could change in next year as growing signs point to a U.S. recession. “Still, the unemployment rate is currently project to only rise to about 4.5 percent in 2023, still quite low,” Steemers said. “With the recession projected to be short, job losses may be relatively small.”
What isn’t so clear is if the latest jobs report will force Fed action on interest rates. Another interest rate hike is expected next month, although there’s debate over what that increase could be.
To Federal Reserve chairman Jerome Powell, high job openings plus low unemployment signals a tight labor market. And the latest Job Openings and Labor Turnover Survey data show that availability dropped by 1.1 million vacancies in August. That ordinarily would be good news because it suggests that tighter monetary policy has slowed hiring. But this time, the decline in job openings comes against both a decline in the unemployment rate to 3.5 percent and wage growth remaining at rates above the Fed’s 2 percent inflation target. Those factors suggest that the Fed will further tighten monetary policy, possibly at a 75 basis point increase, to dampen inflation. That translates to higher borrowing costs for businesses and consumers, as well as fewer dollars left for discretionary spending at retail.