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SAM AZZARELLO: Welcome to Research Recap. My name is Sam Azzarello, and I lead Content Strategy for Global Research here at J.P. Morgan. I’m joined today by Michael Feroli, our Chief U.S. Economist, to talk about the October jobs report. So, Mike, we’re going to start where we always start, which is high level. Do you want to highlight some key numbers from the report and your observations of the state of the labor market at the moment?

MICHAEL FEROLI: Yeah. So we had 150,000 job gain last month, which was pretty close to expectations. However, I think when you dig into the numbers a little bit, it actually shows a decent amount of softening in labor market activity. Job growth was really driven by local government hiring and health care, so two not very cyclically sensitive sectors. The rest of the economy, you’re seeing pretty good slowing in job growth. You’re also seeing decline in the average workweek. You’re seeing less breadth in overall hiring. And so I do think it’s consistent with an economy that looks like it’s slowing down.

SAM AZZARELLO: OK, so as a corollary question, the uptick in the unemployment rate. Walk us through if that means anything broader about the trend of the labor market.

MICHAEL FEROLI: Yeah. So the unemployment rate, as you mentioned, ticked up to 3.9%. It was 3.4% earlier this year at the low. So we’ve had a half-point move up. You know, you might not want to make too much of a big deal out of one month’s move, but we have seen a pretty consistent trend higher here. And I think you’re seeing that slack opening up in other measures. So you’re seeing the U-6 measure, which also includes other pockets of underemployment. That also moved higher. So I do think you’re seeing a labor market that’s looking a little less tight than it did several months ago.

SAM AZZARELLO: OK, so then let’s turn to wage growth, which we know is an important input for the broader inflation outlook. ECI, the Employment Cost Index, earlier this week came in firmer, while the jobs report today showed that average hourly wages were up 0.2%, which some could say is on the softer side. I wanted to ask you, I guess, about that divergence, and which indicator do you put more weight on?

MICHAEL FEROLI: So keep in mind that the ECI was for the third quarter. And October is, of course, the first month of the fourth quarter. That being said, I think when you look at the broad trends on a year-ago basis, both very consistent, both showing wage growth in the low 4s, which is pretty good, which is actually something — a year or two ago, we were running more like the high 5s on both of those measures. So this is probably something that’s a little more consistent with a stable inflation environment.

SAM AZZARELLO: OK. And then the final question. Given that there is a mosaic of data that comes out around the labor market, and we’ve seen revisions, you’ve told us broadly where you think the labor market’s going. I guess I just want to ask, implications for the Fed. Does anything change for the outlook from here?

MICHAEL FEROLI: So I think earlier this week, we had an FOMC meeting. And Chair Powell sounded pretty content to be on hold. And I think this really validates that they are going to be on hold, barring some big surprise between now and the next meeting at December. And overall, this looks consistent with the soft landing message of an economy that is slowing down and maybe, hopefully, not slowing too fast. So we do think this is consistent, again, with the Fed being on hold, not just in December but for several months.

SAM AZZARELLO: Thanks, Mike, for joining us on Research Recap. Looking forward to talking to you again next month. And thank you to our listeners for tuning in. For more research insights, visit jpmorgan.com/research.

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