Economic Report: U.S. adds robust 531,000 new jobs in October in sign economy is speeding up
The numbers: Companies stepped up hiring in October and added a robust 531,000 jobs, but the biggest labor shortage in decades is still holding back an economic recovery and adding to the largest surge in inflation in three decades.
The increase in hiring almost doubled the number of job gains in September and exceeded Wall Street’s forecast. Economists polled by The Wall Street Journal had forecast 450,000 new jobs.
Job gains in September and August were also stronger than originally reported.
The private sector generated 604,000 new jobs last month and hiring was robust across most industries. Government was the only sector in which employment fell.
The unemployment rate dipped to 4.6% from 4.8% and hit a new pandemic low. Yet the official rate underestimates the true level of unemployment by a few percentage points, economists say.
The most disappointing part of the report: The number of people who joined the labor force only rose by 104,000. That left the rate of participation at a paltry 61.6%.
The labor-force participation rate has barely budged over the past year and remains near the lowest level since the early 1970s. The economy can’t grow much faster unless more people go back to work.
Businesses have tried to attract more workers by raising pay, offering bonuses or improving benefits. Hourly wages jumped again in October and they have risen 4.9% in the last 12 months, one of the sharpest increases in decades.
The downside is higher wages are adding to inflation and raising the cost of living. Much the wage gain workers are reaping is being eaten up by higher prices for rent, food, gas and transportation.
U.S. stocks rose in Friday trading after the data was published.
The rebound in hiring is unlikely to spur the Federal Reserve to hasten plans to withdraw its support for the U.S. economy, at least for now. The Fed would like to see even stronger job gains in the months ahead.
Companies have 10 million open jobs, but many are going unfilled because of a labor shortage.
Bryan R. Smith/Agence France-Presse/Getty Images
Big picture: A rapidly dwindling number of coronavirus cases have paved the way for the economy to speed up, but a lack of workers still poses a big roadblock. Companies can’t produce enough goods and services to keep up with demand because of persistent labor and supply shortages.
The hope is that the fading pandemic, higher pay, the reopening of schools and the end of emergency unemployment benefits will push more people back into the labor force. Some 9 million people lost jobless benefits in September.
It’s by no means guaranteed, however. A large number of people retired during the pandemic, a decision made easier by record stock-market gains. And many are still too afraid of Covid to go back to work.
How many people reenter the labor force — and how quickly — will help determine when the U.S. economy makes a full recovery from the pandemic.
Key details: Restaurants, hotels, theaters and other companies in the hospitality business created 164,000 new jobs last month to lead the way.
These companies are the most sensitive to the coronavirus and hiring briefly dried up during the rapid spread of the coronavirus delta variant.
Employment also increased by 100,000 at white-collar professional businesses, 60,000 in manufacturing, 54,000 in transportation and 44,000 in construction.
Employment fell by 73,000 in government, but the decline largely reflects disruptions in education at the state and local levels tied to the pandemic. The closing and reopening of schools over the past year has distorted Labor Department’s measure for determining government employment levels.
The demand for labor is forcing businesses to compete for workers and entice them with higher pay. Average hourly wages rose 11 cents to $30.96 in October.
The 4.9% increase in wages over the past 12 months is the fastest since the government adopted new tracking measures in 2006. The last time worker pay rose as fast was in the early 1980s during another period of high inflation.
The average number of hours Americans work slipped a tick to 34.7 hours a week but remained near an all-time high. Businesses have increased overtime to cope with the ongoing labor shortage.
Hiring in September and August was a lot stronger than initially reported.
The government revised the number of new jobs created in September to 312,000 from 194,000, based on new information from the businesses surveyed. And the job gains in August were raised to 483,000 from 366,000.
The revised figures show that hiring didn’t slow quite as much as it appeared toward the end of the summer, when the delta outbreak slammed the economy.
What they are saying? “Today’s jobs report shows a strong rebound in U.S. employment despite a continuing labor shortage that is pushing wages higher and spurring inflation,” said Tony Bedikian, head of global markets at Citizens. “The virus is still weighing on the U.S. jobs recovery, but today’s report could be a sign that the economy has turned a corner.”
“Despite widely reported worker shortages, strong underlying demand in the economy is steadily healing the labor market,” said senior U.S. economist Sal Guatieri of BMO Capital Markets. “The only thing missing now is an upturn in participation as the market tightens and wages rise further.”