Three job signals to console the Fed, and a yellow flag

investing.com:

By Howard Schneider

WASHINGTON (Reuters) — The October jobs report likely was a relief to Federal Reserve officials who hope the U.S. economy can edge down softly from a period of high inflation and torrid job growth without rolling over into recession under the weight of their own rate hikes and overall tougher credit conditions.

The monthly data does comes with a footnote: The headline job gains of 150,000 were depressed by a United Auto Workers strike.

But even accounting for that the number was close to the 183,000 monthly pace of job growth sustained for the 10 years before the pandemic, from 2010 to 2019, and to that extent looked «normal» after years of outsized job gains.

Revisions to the August and September numbers were also both lower, knocking 101,000 positions from the total and pushing September's blockbuster first estimate of 336,000 jobs down to 297,000, and August to 165,000, also below the pre-pandemic average.

The pace of wage gains also slowed, something many Fed officials feel needs to happen for inflation to dependably slow from the current 3.4% to its 2% target. Though the level of wage increase consistent with price stability depends in part on productivity, which has been higher of late, the Fed generally feels comfortable with wage gains of around 3% and queasy if the number is much higher. The pace of annual wage growth eased down to 4.1% in October in a continuing decline, while the month-to- month increase of 0.2% annualizes to around 2.4%, within the Fed's comfort zone.

The unemployment rate is also giving Fed officials room to view the economy as undergoing a steady adjustment to the shock of the pandemic, rather than stuck in an inflationary status quo — which would force policymakers