According to the Labor Department, October saw the U.S. job market rebound with nonfarm payrolls increasing more than anticipated and the unemployment rate falling to 4.6%.
Nonfarm payrolls increased 531,000 per month, in comparison to the Dow Jones estimate 450,000. The unemployment rate was predicted to fall to 4.7%.
The private payrolls increased even more, climbing 604,000 after a 73,000 job loss by the government. After Friday’s revision of the Bureau of Labor Statistics initial estimate of 194,000, October saw 312,000 new jobs.
This helped to dispel concerns about rising inflation, severe labor shortages and slowing economic development limiting job creation.
Nick Bunker, Indeed’s economic researcher and director of economic research said “This is the kinda recovery that we can achieve when we aren’t sidelined due to a surge in Covid case cases.” If this is what we see in the coming months for job growth, then we are on the right track.”
It was the hospitality and leisure sector that led the increase, with 164,000 Americans visiting restaurants or drinking places and going on vacations as Covid numbers declined. This sector has recovered 2.4 Million positions that were lost in the pandemic.
Others sectors that saw solid growth included professional and commercial services (100,00), manufacturing (60,00), and transport and warehousing (544,000). While construction added 44,000 jobs, health care saw a 37,000 increase and retail saw a 35,000 rise.
According to estimates, wages increased by 0.4% in the month but rose 4.9% year-over year, reflecting inflationary pressures which have increased throughout the year. One-tenth of an inch was lost in the average work week to reach 34.7 hours.
The drop in unemployment was accompanied by the labor force participation level remaining steady at 61.6%. However, this is still just 1.7 percentage points lower than its February 2020 level. This is a reflection of supply issues and the fact that there are still 3 million Americans not considered to be part of this workforce.
The strength in employment is a positive sign of strong labor demand, but the labor supply is still very low. Michael Pearce from Capital Economics, senior U.S. economist, stated that the increase in labor force was a modest 104,000. That isn’t enough to match population growth.
In the meantime, the household survey showed that job seekers rose by 359,000. The employment level is now about 4.7 millions below pre-pandemic levels.
An additional measure of unemployment which includes discouraged workers as well as those who hold part-time work for economic reasons dropped to 8.3%, from 8.5%. This rate was 7.5% before the pandemic.
It comes amid growing concerns about the current state of the labour market. Companies are finding it difficult to hire workers to cut production hours and scale back their production.
Since the proportion of potential workers is now much lower than before the Pandemic, many companies have raised wages or added other incentives.
The labor market has been slowing since July’s addition of more than one million jobs. There were large drops in August and September due to economists grossly overestimating growth for both those months.
Revisions revealed that these numbers weren’t as bad. The August final reading was also up by 117,000, bringing it to 483,000.
However, there are still concerns that the U.S. economic slowdown is a problem. In the summer, the gross domestic product grew by 2%. This is less than the 2% growth expected during the recovery period from the pandemic.
The recent data shows that weekly jobless claims have fallen, due to a decline in productivity. The data Thursday revealed that productivity has fallen to a record low of 40 years and that the trade deficit reached $80 billion, a new record.
The Federal Reserve stated earlier this week that job growth was strong enough to allow it to reduce its monthly bond purchases. This is a key part of the bank’s efforts to stimulate the economy in the midst of the current pandemic. Jerome Powell however stressed that things must improve for the Fed to raise interest rates.