Employment rose by 204,000 in October with gains across many sectors including manufacturing. Partial government shutdown appeared to impact data less than the hype. Wages and job gains good for income.
Stronger Job Gains Suggest Sustained Growth
Over the past three months, nonfarm employment has averaged 202,000 jobs, while the private sector has gained 190,000 on average (top graph). This suggests a 2-2.5 percent pace of economic growth in the fourth quarter. Both construction and manufacturing sectors have posted job gains over the past three months and this is a plus for industrial production. Other private sector job gains were widespread in business services, trade, education & health and leisure & hospitality. The bottom line is that from an employment perspective, growth continues, with modest, but steady improvements in hiring.
Wages and the Unemployment Rate: Improvement
Growth in average hourly earnings improved to 2.2 percent year over year in October. With modest CPI inflation, we are now seeing a rise in real incomes and therefore expect continued momentum for consumer spending. In this cycle, the response of earnings to declining unemployment has not been as strong as in prior cycles, and therefore the gains in real income remain subpar compared to earlier recoveries.
Unemployment Ticks Up
October's unemployment rate rose to 7.3 percent (middle graph), yet the drop of 720,000 in the labor force was abnormally large. This pushed the labor force participation rate down 0.4 percentage points to 62.8 percent, the lowest rate since March 1978. While this month's surveying difficulties are likely overstating October's drop it does not change the trend's direction. The substantial decline in the participation rate to a 35-year low is a reminder of the difficulty of getting the marginally attached unemployed worker back into the flow of the labor market. Moreover, another low reading of the employment-population ratio to 58.3 percent is a reminder of the challenge to public financing of entitlements and to potential GDP estimates over the long-run.
Part-Time Workers: A New American Labor Market
One significant change in the labor market this cycle is the historically high share of workers at this advanced stage in the recovery who are employed part-time for economic reasons (bottom graph). This measure refers to people who work part-time due to an inability to find full-time work or perhaps a seasonal decline in demand. The still-elevated rate suggests continued slack in demand for the goods and services that we produce, but also reluctance from firms to hire the traditional full-time, permanent employee. Temporary help traditionally has been considered a springboard to a stable, permanent, full-time job. Yet, the persistence of outsized temporary instead of permanent employees suggests a potential permanent shift in the labor market today.
Stronger Job Gains Suggest Sustained Growth
Over the past three months, nonfarm employment has averaged 202,000 jobs, while the private sector has gained 190,000 on average (top graph). This suggests a 2-2.5 percent pace of economic growth in the fourth quarter. Both construction and manufacturing sectors have posted job gains over the past three months and this is a plus for industrial production. Other private sector job gains were widespread in business services, trade, education & health and leisure & hospitality. The bottom line is that from an employment perspective, growth continues, with modest, but steady improvements in hiring.
Wages and the Unemployment Rate: Improvement
Growth in average hourly earnings improved to 2.2 percent year over year in October. With modest CPI inflation, we are now seeing a rise in real incomes and therefore expect continued momentum for consumer spending. In this cycle, the response of earnings to declining unemployment has not been as strong as in prior cycles, and therefore the gains in real income remain subpar compared to earlier recoveries.
Unemployment Ticks Up
October's unemployment rate rose to 7.3 percent (middle graph), yet the drop of 720,000 in the labor force was abnormally large. This pushed the labor force participation rate down 0.4 percentage points to 62.8 percent, the lowest rate since March 1978. While this month's surveying difficulties are likely overstating October's drop it does not change the trend's direction. The substantial decline in the participation rate to a 35-year low is a reminder of the difficulty of getting the marginally attached unemployed worker back into the flow of the labor market. Moreover, another low reading of the employment-population ratio to 58.3 percent is a reminder of the challenge to public financing of entitlements and to potential GDP estimates over the long-run.
Part-Time Workers: A New American Labor Market
One significant change in the labor market this cycle is the historically high share of workers at this advanced stage in the recovery who are employed part-time for economic reasons (bottom graph). This measure refers to people who work part-time due to an inability to find full-time work or perhaps a seasonal decline in demand. The still-elevated rate suggests continued slack in demand for the goods and services that we produce, but also reluctance from firms to hire the traditional full-time, permanent employee. Temporary help traditionally has been considered a springboard to a stable, permanent, full-time job. Yet, the persistence of outsized temporary instead of permanent employees suggests a potential permanent shift in the labor market today.
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