165,000 Jobs and a Possible Rate Hike: What October's Jobs Report Means for Your Wallet
The economy blew past forecasts in October. Good news for workers can mean pricier borrowing heading into the holidays. Here is the plain-English version.
Photo: Patrick Weissenberger / Unsplash.
Wall Street was braced for a soft number. It got a blowout.
The U.S. economy added 165,000 jobs in October, according to the Bureau of Labor Statistics, more than double what economists expected. Most forecasts sat somewhere between 60,000 and 70,000. The unemployment rate fell to 4.1%, and September's weak report was revised up, from 29,000 jobs to 60,000.
Where the jobs came from
- Professional and business services: about 70,000 jobs
- Healthcare: about 42,000 jobs
- Transportation and warehousing: about 25,000 jobs
- Manufacturing: about 19,000 jobs
Leisure and hospitality was one of the soft spots, losing jobs for the month. Wages rose 0.4% in October and 3.1% over the past year.
Why a strong report can be bad news for borrowers
Here is the twist. A hot job market gives the Federal Reserve more room to keep pushing interest rates up to fight inflation. The Fed's benchmark rate currently sits at 3.75% to 4%, and after Friday's report, traders added to bets that the Fed will raise rates again at its December 8 to 9 meeting. Treasury yields climbed. Stocks were mixed: the Nasdaq rose, while the Dow slipped.
The Fed will still look at more data first, including the November jobs report and October's inflation numbers, before it decides.
The Den's take: what to watch in your own money
You do not need to trade bonds to feel this. Here is where a December hike would show up:
Credit cards. Most card rates move with the Fed. If you are carrying a balance into holiday shopping season, every hike makes that balance more expensive. Paying it down now is the closest thing to a guaranteed return.
Car loans and personal loans. If you are already shopping for one, rates could tick up again. Get quotes from more than one lender, including credit unions.
Savings. The upside: high-yield savings accounts and CDs tend to pay more when rates rise. If your cash is sitting in an account paying close to nothing, this is the moment to compare.
Mortgages. Mortgage rates follow longer-term bond yields more than the Fed directly, and those yields jumped on Friday. If you are house hunting, watch them closely.
The bigger picture
More people working is good news, full stop. Hiring has now averaged well above the pace the market expected over the past three months. The question for the next month is whether that strength keeps inflation sticky, and whether the Fed responds.
This is general information, not financial advice. For decisions about your own money, talk with a licensed professional.
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Sources: Yahoo Finance: 'A blowout': US added 165,000 jobs in October · Yahoo Finance / Reuters: Strong October jobs report sends yields higher · Nacionale: Will the Fed raise interest rates in December?