United States: Labor market slows but shows resilience in October
November 1, 2019
The latest jobs report shows the labor market remained strong at the start of the fourth quarter. Non-farm payrolls increased by 128,000 in October, handsomely beating out market expectations of 90,000. Moreover, September’s job gains were revised up from 136,000 to 180,000. The three-month average payroll gains clocked in at 176,000 in October, down from September’s revised 188,000 but still comfortably above the 100,000 needed to absorb new entrants in the workforce.
Looking at the details, the General Motors strike shaved nearly 50,000 jobs from October’s figure, which will likely reverse in the November report. Meanwhile, the leisure and hospitality, and education sectors recorded strong job gains, while health care employment rose higher in the month. Hiring in financial activities and wholesale and retail trade also grew briskly. Government payrolls, on the other hand, fell in October as a result of the completion of temporary positions for the 2020 Census.
The unemployment rate ticked up to 3.6% in October from 3.5% in September, which was in line with market expectations. That said, the labor force participation rate increased to 63.3% (September: 63.2%). Meanwhile, hourly earnings rose 0.2% month-on-month following a flat reading in September. Annual wage growth edged up to 3.0% in October from 2.9% in September, matching market expectations.
Turning to the outlook, James Knightley, chief international economist at ING, notes that headwinds remain on the horizon, explaining:
“In terms of where we go from here, we note that business investment contracted in both 2Q19 and 3Q19 and we suspect it will contract again in 4Q given the weak durable goods orders numbers. This is not an encouraging signal for business sentiment and the willingness of companies to put money to work. The knock-on effect is that it also implies businesses are going to be more reluctant to hire workers, which suggests payrolls growth will likely slow further and upside pressure on wages will become less intense.”
Author: Lindsey Ice, Economist