Steady October employment gains and a drop in the jobless rate to levels last seen in July 2008 suggest the U.S. economy is getting back to normal.
Employers added 214,000 jobs last month, the Labor Department said, helping to push the unemployment rate down a tenth of a percentage point to 5.8 percent. Job gains were across all sectors of the economy, and hiring estimates for August and September were increased by a combined 31,000 jobs.
“All the trend lines in the job market look very good,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “Job growth is consistently strong and the gains are broad-based across industries and pay scales.”
The positive report from the Bureau of Labor Statistics came a week after the government reported economic growth of 3.5 percent from July through September, and consumer confidence returned to levels last seen before the financial crisis of 2008.
“Our private sector has now added 10.6 million new jobs over the last 56 months, and this is the strongest job growth that we have seen since the 1990s,” President Barack Obama said, welcoming the good news just days after his Democratic Party suffered bruising losses in midterm elections.
The wide range of improving economic indicators suggested an upward spiral in which employment gains bring even more jobs.
Scott Anderson, the chief economist for Bank of the West in San Francisco, said the economy was now gaining in 4 out of 5 areas needed for what economists call a virtuous cycle: jobs, productivity, wages and business expansion.
“Consumer spending is the only area where we still fall short,” Anderson said. “And the consumer’s ability to borrow and spend suggests a stronger showing from the consumer in the quarters ahead.”
Plunging gas prices help there, leaving more disposable income in the wallets of average Americans. That should ease the sting of flat wages, which remain one of the few soft spots in an otherwise strong report. They rose at an annual rate of 0.1 percent in October, and about 2 percent over the past 12 months.
“The only blemish in the jobs data is still-soft wage growth that is barely keeping pace with inflation. However, this is set to soon change,” said Zandi. “At the current pace of job growth, unemployment and underemployment are falling quickly. The job market will be tight enough by the spring for wage growth to meaningfully pick up.”
Only the housing sector lags.
“The key to even stronger job growth is a revival in housing construction,” Zandi said. “Home building remains depressed and well below what is needed to meet demand. Vacancy is low and declining quickly. Rent growth is accelerating. More homebuilding is coming soon, and with it will come more jobs.”
Leisure and hospitality led all sectors, adding 52,000 jobs in October, while the white-collar professional and business-services sector added another 37,000. Retailers added more than 27,000 positions last month, and that was before the seasonal hiring that begins in November.
The hard-hit construction sector posted modest gains in October, adding 12,000 jobs. Skilled construction workers are getting harder to come by, said Ken Simonson, the chief economist for Associated General Contractors of America.
“There were fewer unemployed, experienced construction workers last month than at any time in the past eight years,” he said. “Meanwhile, all construction employees worked an average of 39.2 hours per week, tying the highest mark since that series began in March 2006.”
The construction sector, Simonson warned, might “be on the verge of acute difficulty filling key positions.”
The manufacturing sector continued its forward momentum with another 15,000 posts.
“That is an encouraging sign that manufacturers are continuing to add workers consistent with recent increases in demand and output,” said Chad Moutray, the chief economist with the National Association of Manufacturers. “In addition, manufacturing leaders remain mostly upbeat in their outlook, which should bode well for hiring moving forward in the sector.”
October brought improvement in measures of underemployment – which include workers who are out of the labor force but willing to come back in and people who are working part time but seeking full-time jobs. The combined rate of underemployment and unemployment was 11.5 percent in October, compared with 13.2 percent a year earlier.
The labor-force participation rate inched up a tenth of a percentage point to 62.8 percent, according to government. The percentage of working-age Americans who are in the labor force remains unusually low, however.
“The BLS noted that there were very few signs of labor force withdrawal, suggesting that we could see flat or even upward-drifting participation moving forward,” said Michelle Meyer, senior U.S. economist for Bank of America Merrill Lynch in New York. “The participation has been on a slight downtrend this year, but the pace of decline has moderated considerably.”
A deeper dive into the Labor Department numbers showed:
– For workers 25 and older without high school diplomas, the jobless rate is 7.9 percent. For those with high school educations, it’s 5.7 percent, and it’s a much better 3.1 percent for those workers with undergraduate degrees or higher;
– Black men 20 and older had a jobless rate of 10.7 percent; the rate for black women in the same age group was 9.4 percent. Hispanic women 20 and older had a jobless rate of 7 percent last month, and Hispanic men had a rate of 5.1 percent.
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