United States: Payrolls rebound in October, unemployment rate drops to a 17-year low
November 3, 2017
The employment report released by the Bureau of Labor Statistics (BLS) on 3 November showed that the economy bounced back from hurricane-related disruptions in October, but results were mixed overall. Job growth came in below market expectations and wage growth decelerated sharply, but the unemployment rate fell further. As such, the report does little to alter the probability of an interest rate hike at the Fed’s December meeting. It is, however, likely to turn up the debate in early 2018 as core inflation and wage growth continue to disappoint, despite a very tight labor market and improving economic growth.
Employment growth bounced back in October from hurricane-induced disruptions a month before. Non-farm payrolls rose 261,000 in October, which was somewhat below the 313,000 new jobs market analysts had expected. However, a net upward revision of 90,000 jobs to previous months—including September’s increase of 18,000 payrolls, previously reported as a decline of 33,000 jobs—more than made up for October’s disappointment.
Hiring activity was particularly strong in sectors that had suffered from unfavorable weather in September. Leisure and hospitality employment rose by 106,000 jobs in October, which contrasted the 102,000 jobs shred in the previous month. Goods-producing industries also contributed strongly to October’s reading, with the manufacturing sector adding 24,000 new jobs. Construction jobs were up 11,000 in October, a trend that is likely to accelerate further in the months to come as reconstruction efforts intensify.
The unemployment rate fell again, hitting a 17-year low of 4.1% in October, below market expectations of an unchanged 4.2% rate. However, the drop was largely reflective of a decreased labor force, which lost 724,000 workers in the month. Accordingly, the labor participation rate dipped from 63.1% in September to 62.7% in October. In addition, average earnings growth was flat on a month-on-month basis in October after recording a robust 0.5% increase in September, which took the year-on-year increase down to 2.4% from 2.9% in the previous month.
Author: David Ampudia, Economist