Robust job gains slowing, but October growth still above expectations

The U.S. Bureau of Labor Statistics reported that nonfarm employment grew by 638,000 in October — a figure that further emphasized the bifurcated nature of the country’s labor recovery.

On the one hand, the October report made clear that job growth, while stout, has slowed considerably from the larger gains posted earlier in the recovery. October’s gain was the smallest since the rebound began in May; at October’s pace, getting back to pre-pandemic employment levels would take another 16 months.

Furthermore, while the slowing of labor recovery has been generally expected, some 55% of the jobs shed by the market during March and April haven’t returned. Joblessness for many is growing increasingly permanent, with 36 million people out of work for at least 27 weeks. 

That number is up 46% month over month and represents a full third of all unemployed people still in the labor force out of work for at least 27 weeks. Meanwhile, the persistence of the COVID-19 pandemic into the fall has resulted in headwinds in seasonally dependent sectors like education, with state and local education losing 61,000 and 98,000 jobs, respectively.

“Given the significant disruptions to the education system caused by the COVID-19 pandemic, hiring in the education sector has been unseasonably low,” observed Doug Duncan, chief economist for Fannie Mae. Duncan added that, despite recent gains, total employment remains 6.6% below February’s pre-pandemic peak, reflecting the depth of the ongoing recession. 

Still, October’s report offered much in the way of positivity. Despite the slowdown, October’s gain came in above expectations, with economists polled by Reuters anticipating an increase of 600,000 jobs. Employment has now increased for six straight months, and the unemployment rate fell 1 percentage point to 6.9%. In a reversal from September, the labor participation rate grew by 0.3 percentage points — a sign that workers are coming back from the sidelines.

“The sharp decline in the unemployment rate this month occurred despite the fact that the labor force participation rate increased,” noted Mike Fratantoni, chief economist for the Mortgage Bankers Association. “It remains about 1.5 percentage points below February’s level. While the U-6 and other measures of underemployment remain quite elevated, they are declining almost as quickly as the headline rate.”

The private sector added 906,000 jobs, and construction and logistics remained bright spots in the recovery. Construction added 84,000 jobs, while transportation and warehousing logged a 63,000-job gain. Manufacturing jobs rose by 38,000, though the sector’s employment remains 621,000 lower than in February.

And as other sectors have moderated, many industries that were hit hard by COVID-19 have started to rebound. Leisure and hospitality, for example, added 271,000 October jobs, following an addition of 406,000 in September. Retail trade added another 104,000 October jobs, perhaps reflecting forward thinking from retailers attempting to jumpstart holiday shopping to get ahead of surging COVID cases in the winter.

As has been the case, much about the labor market remains uncertain month to month as the coronavirus crisis continues. The aforementioned virus resurgence will have a big impact if the increase in cases triggers more lockdowns. With colder weather on the horizon, food and drink establishments face renewed risks as outdoor dining becomes less viable. And as many people stay unemployed long-term, it generally becomes harder for them to find work when jobs do become available, a risk that more and more Americans find themselves facing. The labor outlook remains heavily dependent on the trajectory of COVID-19, and absent a vaccine, will continue to do so for the foreseeable future.



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