Not too shabby is my initial reaction to the October jobs report. While the net non-farm October payroll gain was slightly lower (+161K) than our forecast of +169K, the net upward job revisions for August and September of +44K, more than made up the difference. Monthly job gains of this magnitude should be sufficient to justify another Fed rate increase before the end of the year.
Growing signs of a tightening U.S. labor market were clearly visible in this month’s report from dropping unemployment rates to rising wages. The U.S. unemployment rate dropped by a tenth of a percentage point to 4.9% in October. The U-6 measure of unemployment that includes marginally attached workers and those working part-time for economic reasons dropped by two tenths of a percent in October to 9.5%. The lowest level on this broad measure of unemployment since early 2008.
The median duration of unemployment is now 10.2 weeks down from 25.2 in June of 2010, and 11.1 weeks a year ago.
Average hourly earnings jumped +0.4% last month, surpassing economists’ expectations, pushing the year-on-year growth rate in average hourly earnings to a solid 2.8%, the highest rate of the expansion so far. This could lead to some upward revisions in holiday sales forecasts as consumers may be more of a spending mood given their growing purchasing power.
Manufacturing (-9K)and retail trade (-1K) sectors lost net jobs last month. All other major job categories added jobs last month, though private sector services job gains did slow due to weaker job growth from temporary help firms. However, government job growth picked-up at both the state and Federal levels somewhat making up the difference.
Bottom-line, the U.S. labor market has come a long way over the last six years, jobs are seen as more plentiful, the unemployment rate is back to normal levels, wages are growing a little faster, and the duration of unemployment has diminished significantly. This is good news of the average worker who’s probably seeing a little more in their paychecks, spending a little more freely, or maybe even starting to save a little for retirement.
Scott Anderson, Ph.D., Bank of the West Economics, Chief Economist, Executive Vice President
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