October Jobs Report: Labor market recovery gets back on track
Dr. David Kelly
The economy saw a return to a faster pace of hiring in October as declining Covid-19 cases and higher wages helped employers make progress on filling record-high job vacancies.
Total nonfarm payrolls increased by 531,000 in October and large upward revisions for August and September showed that hiring was not as weak as initially reported. Job growth was widespread, led by a 164,000 increase in leisure and hospitality and notable gains in professional and business services, manufacturing and in transportation and warehousing. The only major sector to report a decline in hiring was government employers.
The unemployment rate ticked down further to 4.6% from 4.8%, but the labor force participation rate was unchanged at 61.6%. In response to tight labor availability, wages continued to climb with average hourly earnings up 4.9% from a year ago. Many companies still cannot find enough workers to fill jobs vacancies, underscored by the stagnant labor force participation rate. Prime-age women have been a prominent portion of labor force dropouts, with participation depressed at 56%, as surveys suggest that child care responsibilities remain a primary concern.
Today’s jobs report shows strong signs of progress in the labor market recovery after a not-so-sunny summer. We remain optimistic that higher wages should continue to lure people back to the workforce and declining effects from the pandemic should allow women to get eventually back to work. Further, signs of faster hiring in sectors worst-hit from supply chain disruptions, such as construction, manufacturing and transportation sectors, point to some lessening of these bottlenecks in the months ahead. However, structural issues, such as retiring baby-boomers and lower immigration, will continue to weigh on participation in the years ahead.
It should be noted that while rising employment in those sectors experiencing greater supply chain problems could make much higher inflation transitory, the broader increase in wages in recent employment reports should continue to bolster inflation in a post-pandemic environment. For the Federal Reserve, this report is another confirmation of both a steady labor market recovery and persistent inflation pressures.