Even top economists were surprised when the United States Labor Department released its latest figures this morning, indicating employers added 271,000 jobs to the nation’s payrolls in October. The median forecast called for a 185,000 advance. Average hourly earnings climbed from a year earlier by the most since July 2009.
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Employment in professional and business services rose by 78,000 in October, compared with an average monthly gain of 52,000 over the prior 12 months. By doing so, this report has effectively cleared the way for the Fed to start raising interest rates at next month’s meeting. Adding to this certainty is the minutes from the Federal Reserve’s October meeting, which include a rate hike agenda in the bank’s December policy meeting. Administrative and support services added the most of the group with 46,000 jobs. An increase in jobs of this magnitude means the consumption side of the economy in the fourth quarter “is going to do just fine”, he said.
“Obviously, it was a good report”, Mayland said. The Fed needs to communicate that the rate hike path will be gradual, he said, and he repeated his concerns about the impact of a rate rise when the economy is still not near the Fed’s target rate on inflation.
“But October’s report also provides a few evidence that the demise of the Phillips curve might have been exaggerated”.
The unemployment rate and number of unemployed persons were virtually unchanged from September to October at 5.0 percent and 7.9 million, respectively, but are down by 0.7 percentage points and 1.1 million.
Zero: The number of new jobs in manufacturing last month.
Payrolls have increased an average 230,000 per month over the past year, though that has declined to 187,000 over the past three months.
Strong hiring should continue to reduce the unemployment rate over time. It marks the first time it has been under 10 percent since May 2008, months before the US financial crisis, and well below the crisis peak of 17.1 percent.
One wild card in Friday’s report will be average hourly pay, which rose just 2.2 percent in September from a year earlier. But the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, held at a near 38-year low of 62.4 percent.
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American manufacturing has taken a hit with softening sales in overseas markets, a stronger dollar and oil-sector weakness depressing demand. The October FOMC statement and Chair Yellen’s testimony to Congress were more hawkish than expected, suggesting the committee saw downside risks from global developments as having diminished and activity pointing to a “live possibility” of a rate hike in December. Services, which account for about 90 per cent of the economy, are relatively shielded and faring better.
