The economy added 214,000 net new jobs in October. The unemployment rate dropped from 5.9% to 5.8%. The 5.8 percent official unemployment rate is the lowest since the summer of 2008.
The August report was revised higher to 203,000 and the September report was revised higher to 256,000; for a net increase of 31,000 jobs added from revisions. Employment is now up 2.64 million year-over-year, and up 2.3 million year to date. So far in 2014 the US has gained an average of 229,000 jobs a month, the fastest pace since 1999. October was the ninth consecutive month of 200,000 or more jobs gained, and that hasn’t happened since 1994. Total employment is up 10 million from the employment recession low and up 1.3 million from the previous peak; although it should be noted that full-time employment has not returned to the previous peak, while part-time employment is quite a bit higher than the peak. Private employment is up 10.6 million from the employment recession low.
This latest report represents 56 consecutive months of private-sector job growth, which represents the longest streak in US history, but it isn’t the strongest streak of job growth. The strongest recovery came in the early 1950s, a 13-month stretch that averaged 315,000 jobs created per month. And then there was the period from 1993 to 2000, an 85 month stretch that was interrupted in January 1996, when payrolls dropped 2,000 mainly due to blizzards and bad winter weather.
The net job growth of 214,000 was just a bit below analysts’ estimates of 225,000 to 235,000, but it wasn’t enough to send a shock wave; it was right in line with the trends for the past year. And this is the initial estimate, and revisions have been typically adding about 28,000 jobs to the initial estimates.
The Labor Department statisticians separately survey households, asking people if they have a job. This alternative measure of employment receives less emphasis, because it tends to be extremely volatile. Bearing this disclaimer in mind, it is notable that the household survey suggests that employment grew by an impressive 683,000 in October.
Also, a point to consider is that the numbers were seasonally adjusted; they always are; the adjustment smooths out volatility. In non-seasonally adjusted terms it was the best October for job growth ever, with 1.064 million net jobs created during the month. The previous record for an October was 980,000 in 2004. Now there are many reasons for seasonal adjustments, holiday workers, jobs that follow the seasons, teachers on break for the summer and then returning, census workers; and that is why the number is volatile and not used in most calculations. So, I’m not sure what to make of it, other than to say there is an anomaly, and it is a positive anomaly, and don’t be surprised if we see a big revision on the initial number.
The Labor Force Participation Rate increased in October to 62.8% from 62.7% in September. This is the percentage of the working age population in the labor force. So, it looks like a few people are coming back into the labor pool. Of course, over the past 6 years, millions of Americans left the workforce, and have not returned; the boomer generation is reaching retirement age, and whether they want to or not, many are retiring. There are now 37 million boomers over age 65, and another 50 million over age 55. This is a massive demographic shift. The boomers have had an outsized influence on everything ever since they were born, why should it change when they go into retirement?
Now, sometimes the unemployment rate goes down because people drop out of the labor pool but that was not the case in October; more people joined the labor pool in October and the unemployment rate went down because they found jobs.
There are 2.91 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.95 in September. Over the past year there has been a sizable decrease in the number of discouraged workers who have given up hope of finding a job, down 1.2 million; and the number of part-time workers who wanted full-time employment, down 1 million.
The number of persons working part time for economic reasons decreased in October to 7.02 million from 7.10 million in September. These workers are included in an alternate measure of unemployment known as U-6, which decreased from 11.8% in September to 11.5% in October.
The still large numbers of long term unemployed and underutilized workers is probably the best explanation for stagnant wage growth.
In late 2009, the unemployment rate for men topped 11%; for women, the unemployment rate never got past 9%. Now, the tide has turned and the unemployment rate for women is 5.9%, while the unemployment rate for men is 5.6%.
The October unemployment rate for workers age 25 and older with no high school diploma is 7.9%; for high school grads the rate is 5.7%; for workers with some college the unemployment rate is 4.8%, and for workers with a bachelor’s degree or more the unemployment rate is 3.1%.
Hiring in October was strongest at retailers, restaurants and bars; industries that typically boost employment ahead of the holidays. Leisure and hospitality added 52,000 jobs and retailers created 27,000 openings. Most of these jobs pay below the average national hourly wage. The health-care sector added 25,000 employees and professional jobs grew by 37,000. Manufacturers hired 15,000 workers and the construction trade added 12,000. Most of these jobs pay more than the average hourly wage, though half of the white-collar hires in October were temps who earn significantly less. State and local governments lost jobs for 4 straight years, but that trend is slowly changing and in October, state and local government added 8,000.
Only about 40% of the new jobs created in October were in fields that pay above the average hourly U.S. wage of $24.57. That’s down from 60% in September. There has been a slight shift to higher paying jobs, with 58% of the new jobs created this year paying above the average hourly wage, compared to 50% in 2013.
Average hourly wages were little changed in October. Hourly pay rose 3 cents to $24.57, putting the 12-month increase at 2%, the Labor Department said Friday. Year-over-year increases have ranged from 1.9% to 2.2% in the past two years. This suggests that despite the tightening labor market, employers are able to attract a sufficient number of applicants that they do not yet need to bid up wages. The amount of time people worked each week, however, rose a tick to 34.6 hours and sat at a post-recession high. Hours tend to increase as an economy strengthens.
And while average hourly wages are stuck in a 2% rut, the average weekly wages are starting to move up slightly. Workers aren’t getting more per hour, but they are getting more hours. Average weekly wage growth came in at 2.85% in October, the fourth month it has been above 2.5% growth rate. Now, that’s still indicates slack in the labor market, but it is a little less slack. Again, we need to see hourly and weekly wage growth moving to about 3.5% or 4%, but it would make sense that the weekly average leads the hourly average.
For now we do not have wage push inflation. The Federal Reserve will likely look at today’s report and conclude they are on course. If the economy adds about 229,000 jobs per month (that’s the average for 2014), then the unemployment rate would drop to 5.5% within the next 5 months. That is when the debate will get hot about the Fed raising interest rates.
Five years ago, we would have considered this a fantastically great jobs report; but wages are not growing; everybody feels overworked and underpaid. And you may not realize it but we keep moving closer and closer to a position of strength in the labor market.
*Note: forgive me for not including appropriate links. I’m still working out some issues related to this revision of the website, but here is a link for your weekend reading pleasure – http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106