The labor market bounced back strongly in October as employers added 271,000 jobs, bolstering the case for the Federal Reserve to raise interest rates next month.
The unemployment rate, which is calculated from a different survey, fell to 5% — lowest since April 2008 — from 5.1% despite a sharp rise in the number of Americans looking for work, the Labor Department said Friday.
Economists surveyed by Bloomberg estimated 182,000 new jobs were created, according to their median forecast.
Equally encouraging is that average hourly earnings rose 9 cents to $25.20 and are now up 2.5% over the past year, the biggest jump since 2009, after sluggish gains of about 2% for most of the recovery.That should give the Fed confidence that inflation is picking up and a rate increase next month may be warranted.
Also,the modest job gains for August and September, which averaged 139,000, were revised up 12,000.
And a broader measure of unemployment – that includes part-time workers and discouraged Americans who have given up job searches, as well as the unemployed — fell to 9.8% from 10%.
In October, private employers added 260,000 jobs, fueled by broad-based gains in professional and business services, health care, retail and construction. Federal, state and local governments added 3,000.
The report “confirms that the weakness in August and September was just a temporary blip and, given the circumstances, a December interest rate hike would now appear to be the most likely outcome,” economist Paul Ashworth of Capital Economics wrote in a note to clients. The better-than-expected report prompted Barclays Capital to revise its forecast for a rate increase to December from March.
Fed Chair Janet Yellen told Congress this week that a rate hike next month — which would be the first in nearly a decade — is a “live possibility,” assuming the economy progresses as the Fed expects. Payroll reports for October and November are deemed critical to the Fed’s decision, especially after job gains fell recently from their monthly average of 200,00-plus for most of 2015.
Professional and business services led last month’s surge, adding 78,000 jobs. Health care added 45,000; retail, 44,000; leisure and hospitality, 41,000; and construction, 31,000.
But the oil industry continued to lay off workers amid low crude prices that have curbed drilling activity. Mining and logging companies cut 5,000 jobs. And employment was unchanged for manufacturers. Factories have been buffeted by oil drillers’ reduced demand for steel and related products, as well as a strong dollar and global weakness that have hurt exports,
Other labor market indicators have been encouraging lately. Initial jobless claims, a barometer of layoffs, hover at pre-recession levels. A measure of service-sector activity and employment, along with online job ads, rose last month. And payroll processor ADP said its own data showed businesses added a respectable 182,000 jobs.
While consumer spending and the housing market have buoyed the economy and labor market, the global turmoil, rising greenback and oil slump have hurt business confidence and investment. The government reported last week that economic growth slowed to 1.5% at an annual rate in the third quarter from 3.9% in the second quarter.
The bleaker business outlook and a tanking stock market over the summer hurt hiring.
But stocks have rebounded recently and many economists expect solid domestic demand to fuel an improving labor market in the final months of the year.
This thought piece is featured courtesy of USAToday.com written by Paul Davidson / Nov 6, 2015