The US economy rebounded to create 261,000 jobs in October, a big shift from last month’s decline of 33,000, but not enough to beat expectations. Analysts expected the shift in job creation caused by a series of natural disasters in September to be greater, but it still shows a rebound, if not quite as robust. The U-3 unemployment rate fell to 4.1%, but the Household survey over the last two months has turned out to be a mess:
Total nonfarm payroll employment rose by 261,000 in October, and the unemployment rate edged down to 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that largely reflected the impact of Hurricanes Irma and Harvey. In October, job gains also occurred in professional and business services, manufacturing, and health care.
The unemployment rate edged down by 0.1 percentage point to 4.1 percent in October, and the number of unemployed persons decreased by 281,000 to 6.5 million. Since January, the unemployment rate has declined by 0.7 percentage point, and the number of unemployed persons has decreased by 1.1 million.
The BLS issued some upward revisions for the last two months, turning September from -33,000 to +18,000, and adding 39,000 jobs to August’s figures. The revisions added 90,000 jobs to the quarter, producing a three-month average of 162,000 jobs added. That’s far from spectacular, and if the October results do represent mainly a shift of creation from a hurricane-drenched September, then the economy isn’t percolated as hot as some might have imagined.
Last month’s Household survey problems resulted in a balancing series of outlier results for October. Recall the bragging about how it showed an increase of 575,000 in the labor force, and 906,000 additional people employed? Well, today’s report shows a decline of 765,000 in the civilian labor force and a decline of 484,000 among people with jobs. It also shows a decline of 281,000 in unemployed people. Today’s report shows nearly a million people added to the “not in labor force” figure, too, making for the second wild outlier from the BLS’ Household survey in a row.
The net result of all this churn dropped the participation rate four-tenths of a point to 62.7%, and the employment-population ratio down two-tenths to 60.2%. That doesn’t match up well with a drop in the U-3 rate. These numbers are still a mess, and it’s tough to figure out just how much to rely on them. Since these numbers are used for the U-3 and U-6 jobless rates, take those figures with a large grain of salt.
The wage outlook didn’t improve much, either:
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in October. In manufacturing, the workweek increased by 0.2 hour to 41.0 hours, and overtime edged up by 0.1 hour to 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.7 hours. (See tables B-2 and B-7.)
Average hourly earnings for all employees on private nonfarm payrolls, at $26.53, were little changedin October (-1 cent), after rising by 12 cents in September. Over the past 12 months, average hourly earnings have increased by 63 cents, or 2.4 percent. In October, average hourly earnings of private-sector production and nonsupervisory employees, at $22.22, were little changed (-1 cent).
That would be consistent with flat growth at or near the rate of population growth, which is what the three-month average suggests. It doesn’t produce much optimism for a big spike in hiring the next few months; it seems as though employers have no need to offer higher competitive wages, at least for now.
CNBC’s Jeff Cox calls it a miss, but still reflecting some momentum:
The report comes as the Federal Reserve is expected to hike its benchmark rate another quarter point in December. However, the central bank has been wary over the lack of inflation, particularly in the average hourly earnings component of the nonfarm payrolls count.
Wage growth again disappointed, with earnings actually off by 1 cent an hour and showing just a 2.4 percent annualized gain. …
Though falling short of hopes, the Bureau of Labor Statistics report coincides with other data indicating economic momentum. Gross domestic product grew by 3 percent in the third quarter, according to the government’s first estimate, and CNBC’s tracker shows the fourth quarter on pace to rise 2.8 percent.
AP’s Christopher Rugaber sounded more optimistic:
U.S. employers added a robust 261,000 jobs in October in a bounce-back from the hurricanes that slammed the Southeast in September.
The unemployment rate declined to 4.1 percent, the lowest in nearly 17 years, from 4.2 percent in September, the Labor Department said Friday.
October’s burst of hiring mostly reflects a rebound from the hurricanes that temporarily depressed job gains in September. But it also shows that for all their fury, the storms did not knock the economy off course. Over the past three months, hiring has averaged 162,000. That is similar to the pace of hiring before the hurricanes.
Reuters’ Lucia Mutikani sounded an alarm on the drop in wage growth, the smallest in 20 months:
U.S. job growth accelerated in October after hurricane-related disruptions hurt employment in September, but there were signs that labor market momentum was slowing as annual wage gains sharply retreated. …
But the return of the lower-paying industry workers held down wage growth in October. Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms. That lowered the year-on-year increase to 2.4 percent, which was the smallest annual increase since February 2016. They shot up 0.5 percent in September, lifting the annual increase in that month to 2.9 percent.
Economists, however, remain optimistic that wage growth will accelerate with the labor market near full employment. Last month’s one-tenth percentage point drop in the unemployment rate took it to its lowest reading since December 2000. The decline, however, reflected a drop in the labor force. The jobless rate is now below the Fed’s median forecast for 2017.
Wage growth might be the best indicator from this report, along with the other data from the Establishment survey. Its parallel, the ADP employment report, nearly hit the nail on the head with its prediction of 235,000 jobs added last month. Any data from the suddenly problematic Household survey should be used only cautiously until it stops producing wild swings as has been seen the past two months.
Update: I left the word “jobs” out of the first sentence. My apologies; it’s fixed now.