Mixed job reports from the last two months gave way to sterling October data, reinforcing the narrative of the strength of the U.S. economy.
The nation’s nonfarm employers added 128,000 jobs in October, according to the Bureau of Labor Statistics (BLS), handily surpassing the economist estimates of 75,000 to 89,000 jobs and quelling (temporarily, at least) the talk of an impending recession.
“While job growth was slower in October, the increase of 128,000 actually exceeded market expectations,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. He added that “this news should not change the Fed’s view that rates should stay stable for now,” referencing the central bank’s comments that rates would hold steady after trimming another 25 basis points last week.
The unemployment rate, which fell to its lowest reading in 50 years in September, inched upward to 3.6%, though that, too, comes with a silver lining: It’s because 325,000 people entered the civilian labor force to look for work, signaling confidence in the job market. October’s labor participation rate grew to 63.3%, highest since August 2013.
Hiring remains slowed greatly year over year, as October’s gain is dwarfed by the 277,000 jobs added in the same month in 2018. For the year, monthly gains are averaging 167,000 in 2019 compared to 223,000 in 2018 — a drop of 25.1%. Still, 2019’s monthly average of job additions continues to fall within what economists consider healthy, especially as the country’s record long economic expansion continues.
Disappointing increases from the previous two months also received a boost, with nonfarm job additions for both August and September receiving significant upward revisions. August’s already revised estimate of 168,000 gains was bumped up again to 219,000, while September’s initial reading of 136,000 was revised to 180,000.
Even the loss of 36,000 jobs in the persistently flagging manufacturing sector comes with a bit of good news. According to William Beach, commissioner of the BLS, much of the drop reflects the impact of the 40-day General Motors strike that ended during the tail end of October.
On the flipside, sectors with big job growth numbers during the month included food services and drinking establishments, which added 48,000 jobs. The industry has seen a surge of hiring of late, averaging 38,000 additions over the past three months, compared to an average monthly gain of 16,000 in the previous seven months.
CNBC noted that while such positions often come with lower wages, the additions also reflect consumer demand and the willingness to spend discretionary money, suggesting that the economic expansion continues to be fueled by strong consumer activity. Odeta Kushi, deputy chief economist at First American Financial Corp., said that won’t change any time soon, given that people are expected to keep spending because jobs are plentiful and wages are rising.
“The recent third quarter GDP numbers underscored the importance of the consumer in this expansion,” Kushi said. “The GDP increased at an annual rate of 1.9 percent in the third quarter of 2019. The majority of this growth was driven by a 2.9 percent increase in consumer spending.”
Kushi also noted October’s month-to-month increase of 2,900 residential construction jobs, which could foreshadow more home construction on the horizon that could benefit home buyers.
“The rise in construction jobs is good news for the housing market,” she said, “as finding ways to increase the productivity of construction workers is critically important to alleviating the labor shortage challenge and the gap between household formation and home building.”