Employers shrugged off worries about the U.S. economy downshifting, adding a whopping 271,000 non-farm jobs in October and raising worker pay in the process.
The unemployment rate in October dipped slightly to 5 percent, and measures of stress in the job market continued improving, the Labor Department reported Friday in a solid monthly jobs report.
“The weaker job gains in the previous two months look like nothing more than speed bumps,” said Mark Zandi, chief economist for forecaster Moody’s Analytics. “At this pace of job growth, unemployment and underemployment are rapidly declining, and full employment is coming into view.”
Here are three important takeaways from the October report.
Hiring broad across sectors
Employers across most major sectors of the economy were robust in their hiring. The professional and business services sector led all others with 78,000 new posts. Over the prior 12 months, this category, which includes better-paying white-collar jobs, had averaged 52,000 jobs.
The hard-hit construction sector continued to rebound as new home starts and renovations continue to grow. The sector added 31,000 jobs for the month. Retailers continued to add jobs as the holiday season approaches, with nearly 44,000 new hires. The leisure and hospitality sector added 41,000 posts, a sure sign that Americans are again eating out and companies are sending employees on business trips.
The two sour notes in hiring were the labor-intensive manufacturing sector, which was flat for October, and transportation and warehousing, which shed about 2,100 jobs. These sectors, which work in tandem, have been hampered by a slowing global economy and strong U.S. dollar that has hurt American exports because they are now more expensive relative to their competition.
It’s getting better for workers
The unemployment rate, when rounded, fell from 5.1 percent to 5 percent last month. There are 1.1 million fewer unemployed workers than a year earlier, the Labor Department reported. Deeper in the report, there were signs that stress points in the labor force are easing up.
The number of people working part time but wanting full-time work fell again in October and now stands at 5.8 million. That’s 1.2 million fewer of these so-called involuntary part-time workers than there were 12 months earlier.
Similarly, a Labor Department measure of underemployment, sometimes called the “real” unemployment rate, fell to 9.8 percent in October. It marks the first time it has been under 10 percent since May 2008, months before the U.S. financial crisis, and well below the crisis peak of 17.1 percent.
October jobs bounced back as gains came in stronger than even we expected.
John Silvia, chief economist for Wells Fargo Securities
And workers are finally beginning to see their take-home pay improve. Average hourly earnings rose 0.4 percent in October and 2.5 percent over the past 12 months. With inflation tame, workers are earning modestly more and their dollars stretch further.
Good news for Fed, Democrats
The Federal Reserve has wrestled with when to lift its benchmark lending rate for the first time since 2006. Many analysts now think it has the green light to do so, which will result in gradually higher borrowing costs for consumers and businesses alike on mortgages and vehicle purchases.
“The overall strength in this report should serve to enhance the chances that the Federal Reserve will begin to raise short-term interest rates at its December meeting,” said Chad Moutray, chief economist for the National Association of Manufacturers.
If the months ahead show October-like job numbers, it may help the prospects for Democrats seeking to retake control of the Senate, and for whoever becomes their presidential candidate. Just as the party suffered when the economy and hiring were down, it may benefit from the rebound.
“This is also good news for President Obama’s approval rating, which, according to our presidential election model, is a key variable in determining the winner of the next election,” said Zandi, a closely followed economic forecaster. “The Democratic nominee for president will likely have the economic winds at their back.”
October by the numbers
Professional and business services: Up 78,000
Leisure and hospitality: Up 41,000
Health care: Up 44,900
Construction: Up 31,000
Temporary help services: Up 24,500
Transportation and warehousing: Down 2,100
Retail: Up 43,800
Financial services: Up 5,000
Government jobs: Up 3,000
Source: U.S. Bureau of Labor Statistics