The US Economy and job market snapped back in October, with nonfarm payrolls rising more than expected while the unemployment rate fell to 4.6%, the Labor Department reported on November 5. Nonfarm payrolls increased by 531,000 for the month, compared with the Dow Jones estimate of 450,000. The jobless rate had been expected to edge down to 4.7%. Private payrolls were even stronger, rising 604,000 as a loss of 73,000 government jobs pulled down the headline number. October’s gains represented a sharp pickup from September, which gained 312,000 jobs after the initial Bureau of Labor Statistics estimate of 194,000 saw a substantial upward revision in the report.
The numbers helped allay concerns that rising inflation, a severe labor shortage, and slowing economic growth would tamp down jobs creation. “This is the kind of recovery we can get when we are not sidelined by a surge in Covid cases,” said Nick Bunker, economic research director at job placement site Indeed. “If this is the sort of job growth we will see in the next several months, we are on a solid path.” Markets rallied strongly on the news, with the Dow up nearly 350 points in early trading and government bond yields mostly lower.
The critical leisure and hospitality sector led the way, adding 164,000 as Americans ventured out to eating and drinking establishments and went on vacations again as COVID numbers fell during the month. For 2021, the sector has reclaimed 2.4 million positions lost during the pandemic. Other sectors posting solid gains included professional and business services (100,000), manufacturing (60,000), and transportation and warehousing (54,000). Construction added 44,000 positions while health care was up 37,000 and retail added 35,000. Wages increased 0.4% for the month, in line with estimates, but rose 4.9% on a year-over-year basis, reflecting the inflationary pressures that have intensified through the year. The average workweek edged lower by one-tenth of an hour to 34.7 hours.
The unemployment rate drop came with the labor force participation rate holding steady at 61.6%, still 1.7 percentage points below its February 2020 level before the pandemic declaration. That represents just shy of 3 million fewer Americans considered part of the workforce and is reflective of ongoing concerns about staffing levels. “While the strength of employment was an encouraging sign that labor demand remains strong, labor supply remains very weak. The labor force rose by a muted 104,000, which is not even enough to even keep pace with population growth,” said Michael Pearce, senior US economist at Capital Economics. However, one metric that the Federal Reserve watches closely, the participation rate among so-called prime-age workers 25 to 54, ticked higher to 81.7%.
Treasury Secretary Janet Yellen weighed in on the report with a Twitter thread in which she said the administration’s aggressive fiscal policies that have pumped in more than $5 trillion to the economy helped stave off more dire consequences from the pandemic. “Bold fiscal policy works,” Yellen wrote. “A rebound like this was never a foregone conclusion. When our administration took office back in January, there was a real risk that our economy was going to slip into a prolonged recession. Now our recovery is outpacing other wealthy nations’.”
The report comes amid heightened concerns about the state of the labor market, particularly a chronic shortage that has left companies unable to fill positions to scale back production and cut hours of operation. Companies have been increasing wages and adding other incentives as the working share of the potential labor force operates well below its pre-pandemic level. Since adding more than a million jobs in July, the labor market had slowed sharply through the rest of the summer, with sizeable letdowns in August and September as economists greatly overestimated growth in both months. However, revisions showed that the numbers for those months were not quite as dismal. Along with the boost from September’s initial count, August’s final reading came up another 117,000 to 483,000.