October Delivers A Solid Jobs Report

Jobs Growth in October exceeded expectations, as did wage growth. It's unclear, though, how long these numbers can be sustained.

So far this year, the word governing the jobs market has been “inconsistent.” In January and February we saw numbers that, notwithstanding the fact that most of the nation was undergoing a cold and harsh winter, were fairly strong, suggesting that 2018 could be a good year for jobs growth notwithstanding the fact that we are rather late in the recovery from the Great Recession and nearing a point in the jobs market where we’ve typically seen equilibrium in the past. The following two months, though, March and April, turned disappointing as net jobs growth missed even modest target numbers by wide margins, The job situation improved slightly in May, but even those numbers were about the same as what we saw for most of the final two years of the Obama Administration, numbers which are more consistent with a mature recovery reaching what economists refer to as “full employment.” The same was true for the report for June which was somewhat better than where expectations had been set. The July Report, though, fell short of expectations, and the August report was slightly ahead of expectations. Then, in last month’s report, we saw jobs growth fall below expectations while the top-line unemployment number dipped to 3.7%, level we have not seen in about 50 years. While the Administration and its supporters have touted these numbers as indicative of “amazing” growth, truth is that they aren’t much different from what we saw throughout President Obama’s second term in office. Indeed, as I noted in my post about the December 2017 report, the jobs market seems to be at the point where expecting massive increases in job creation are probably out of the question. Instead, we’re likely to see modest but healthy jobs growth, but not anything spectacular.

Rather than the jobs number, though, most analysts have been keeping an eye on wage growth, which has remained stubbornly lagging for the better part of the past two or three years. At an annualized rate, for example, wages have been growing at roughly 2.7%, which is slowly starting to be not enough to keep up with an inflation rate that has quietly increased as the economy has heated up. With the pool of eligible worker shrinking somewhat and unemployment at rates that are generally considered to be “full employment,” there should be more movement on wages as employers seek to attract workers. So far, though, that hasn’t been happening. This has left some analysts wondering if, thanks to increases in worker productivity and investments in automation, employers are no longer seeing the need to raise wages, something that could have a real impact on workers if prices continue to rise. This is especially important given the fact that other economic statistics are showing that inflation at the wholesale and consumer levels was starting to increase at a faster rate than we’ve seen in the past and that, without more rapid wage growth, Americans would effectively see real wages decline in terms of their purchasing power.

In any case, heading into the release of today’s October Jobs Report, the expectation of analysts and traders was that we would see roughly +188,000 new jobs, with the U-3 Unemployment Rate staying at the 3.7% rate it hit last month. Instead, we got a much better number than that, and at least some sign that wage growth may finally be picking up:

Total nonfarm payroll employment rose by 250,000 in October, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in manufacturing, in construction, and in transportation
and warehousing.

The unemployment rate remained at 3.7 percent in October, and the number of unemployed persons was little changed at 6.1 million. Over the year, the unemployment rate and the number of unemployed persons declined by 0.4 percentage point and 449,000, respectively. (See table A-1.)

Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.4 percent), teenagers (11.9 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (3.2 percent), and Hispanics (4.4 percent) showed little or no change in October. (See tables A-1, A-2, and A-3.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.4 million in October and accounted for 22.5 percent of the unemployed. (See table A-12.)

The labor force participation rate increased by 0.2 percentage point to 62.9 percent in October but has shown little change over the year. The employment-population ratio edged up by 0.2 percentage point to 60.6 percent in October and has increased by 0.4 percentage point over the year. (See table A-1.)

(…)

Total nonfarm payroll employment increased by 250,000 in October, following an average monthly gain of 211,000 over the prior 12 months. In October, job growth occurred in health care, in manufacturing, in construction, and in transportation and warehousing.
(See table B-1.)

Health care added 36,000 jobs in October. Within the industry, employment growth occurred in hospitals (+13,000) and in nursing and residential care facilities (+8,000). Employment in ambulatory health care services continued to trend up (+14,000). Over the past 12 months, health care employment grew by 323,000.

In October, employment in manufacturing increased by 32,000. Most of the increase occurred in durable goods manufacturing, with a gain in transportation equipment (+10,000). Manufacturing has added 296,000 jobs over the year, largely in durable goods industries.

Construction employment rose by 30,000 in October, with nearly half of the gain occurring among residential specialty trade contractors (+14,000). Over the year, construction has added 330,000 jobs.

Transportation and warehousing added 25,000 jobs in October. Within the industry, employment growth occurred in couriers and messengers (+8,000) and in warehousing and storage (+8,000). Over the year, employment in transportation and warehousing has increased by 184,000.

Employment in leisure and hospitality edged up in October (+42,000). Employment was unchanged in September, likely reflecting the impact of Hurricane Florence. The average gain for the 2 months combined (+21,000) was the same as the average monthly gain in the industry for the 12-month period prior to September.

In October, employment in professional and business services continued to trend up (+35,000). Over the year, the industry has added 516,000 jobs.

Employment in mining also continued to trend up over the month (+5,000). The industry has added 65,000 jobs over the year, with most of the gain in support activities for mining.

Employment in other major industries–including wholesale trade, retail trade, information, financial activities, and government–showed little change over the month.

In addition to the numbers above, the Bureau of Labor Statistics reported that total nonfarm payroll employment for August was revised upward from +270,000 to +286,000 and the number for September was revised downward from +134,000 to +118,000. These revisions were offsetting resulting in no net change in total for the two months as a whole. Combined with this month’s jobs numbers, this puts the average jobs growth for the past three months at +218,000 net jobs created per month, a rather significant increase from where the three-month average stood last month. So far in 2018, we’ve seen a total of 1,724,000 new jobs created in 2018 as a whole for an average of +172,400 net new jobs created per month since the start of the year, which is a slight increase from where we stood last month. Combined with the final jobs numbers for 2017, this means we’ve seen a total of 3,336,000 new jobs created since January 1, 2017, a period that has largely coincided with Donald Trump’s tenure as President, for a monthly average over that period of +163,000 new jobs created, which is a slight increase from where this average stood as of last month. As I have been saying since the start of the year, these numbers are most certainly not ones that indicate an imminent massive increase in hiring by employers.

During his campaign for President, Donald Trump promised to create 25,000,000 jobs during his Presidency. That would require the creation of 3,125,000 per year over an eight-year term for an average of 261,000 new jobs per month. Over a four-year term that would require 6,250,000 per year, for an average of 521,000 new jobs per month. Based on the average growth rate we have seen since the start of 2017 it would take nearly twelve and one-half years to reach that goal. Based on the average for 2018 to date, it would take roughly ten years to reach the goal. Based on the average jobs growth for the year to date, it would also take roughly twelve years to reach that goal. Based on the average for the past three months, it would also take roughly ten years to reach Trump’s goal. All of this, of course, assumes that we don’t have even a mild recession during that period. Needless to say, it is unlikely that we’re going to see sustained average jobs growth over the next three to seven years that would put us close to the President’s goal absent a significant change in the nature of the jobs market.

Looking deeper into the numbers, the average workweek across the board was increased by 0.1 hours to 34.5 hours while average hourly earnings rose 5 cents to $27.30. Over the year, average hourly earnings have risen by 83 cents or an annualized rate of 3.1%. This is a stronger wage growth number than we’ve seen in recent months, but it’s worth noting that it comes off several months when wage growth was essentially stagnant, so this may just end up being a statistical blip. As I’ve said before, the relatively slow growth we’ve seen in wage growth could be a sign we’re hitting an equilibrium point in the jobs market that will preclude big jumps in either hiring or hourly earnings on a sustained basis. Also on the positive side is the fact that labor force participation rose while long-term unemployment dropped a bit is a positive sign that more people are entering the jobs market on the belief that there’s more opportunity out there.

The New York Times ties the report to what it calls the overall strength in the jobs market:

Friday’s report, the last official economic reading before Americans vote on Tuesday, offered another reminder of the labor market’s persistent strength.

“The underlying fundamentals of the labor market are still really bright, it’s really the strongest part of the broader economy at the moment,” said Michelle Girard, chief United States economist at NatWest Markets.

The economy has historically not played an outsize role in midterm elections, and this political season, border control, health care and Brett Kavanaugh’s nomination to the Supreme Court have gobbled up airtime. Still, “jobs and the economy” was cited more frequently than other issues as the most important in a survey conducted in early October for The New York Times by the online research platform SurveyMonkey.

October marked the 97th consecutive month of job growth, extending an already record-making streak. Average monthly payroll increases have floated above the 200,000 mark. Last week, the government estimated that the economy grew at a hearty annualized rate of 3.5 percent in the third quarter. Confidence remains high among consumers and business leaders.

The report also offered evidence that sidelined workers are not only feeling optimistic about their job prospects but are actually finding work, which is why the jobless rate did not dip despite the big payroll gains.

While The Wall Street Journal focuses on the growth in wages:

.WASHINGTON—Hiring accelerated in October and the unemployment rate held at a 49-year low, signs of a strengthening labor market that delivered U.S. workers the best pay raises in nearly a decade.

U.S. nonfarm payrolls increased a seasonally adjusted 250,000 in October, the Labor Department said Friday. The unemployment rate held steady at 3.7% in October, matching lowest rate since December 1969. Wages increased last month and advanced 3.1% from a year earlier, the best year-over-year gain for average hourly earnings since 2009.

Economists surveyed by The Wall Street Journal had expected 188,000 new jobs in October and a 3.7% unemployment rate.

Average hourly earnings for all private-sector workers increased 5 cents last month to $27.30. October marked the first time since the recession ended more than nine years ago that the closely watched pay gauge rose better than 3% from a year earlier. During the downturn, wages were growing because employers were letting go of less-experienced, lower-paid workers, leaving higher-earning workers on payrolls.

Now the opposite is occurring. With relatively few unemployed Americans looking for work, employers are increasingly having to bid up wages to poach workers from other employers. That has been happening for several years for higher-skilled workers such as engineers and welders, but now it is occurring for relatively lower-skilled jobs such as warehouse workers and home-care aides.

Amazon.com Inc. this month lifted pay for it lowest-earning employees to $15 an hour. Other large employers, including Walmart Inc. and Starbucks  Corp., have announced similar broad pay increases in recent years.

That provides relief to workers, some of whom felt their paychecks weren’t reflecting the long-running economic expansion in which employers have added to payrolls for a record 97 straight months and the unemployment rate fell to historic lows. Over the past year, wages slowly improved and now are rising solidly ahead of the rate of inflation, which is running near 2%.

But despite the recent improvements, wage gains are still soft compared with other periods of similarly low unemployment. In the early 2000s and late 1960s, wages for nonsupervisors, for which more years of data is available, were growing at a 4% or better annual pace.

That in part reflects that inflation was higher in those periods, but also that worker productivity was growing more rapidly. While productivity has perked up some in the past six months, gains in output per worker have been weak during most the current expansion. If individual workers don’t produce more, it is difficult for employers to justify pay increases that exceed price increases. That could reflect that firms this decade have often opted to add more workers rather than invest in productivity-improving technology

This chart shows how wage growth has been over the course of the recession:

This report is the last set of economic data we’ll get prior to Tuesday’s election and, no doubt, will be something that the Administration will point to as part of the Republican hope that a strong economy will help to stem what still appears to be a “blue wave” that could result in Democrats taking over control of one or both chambers of Congress. In support of that argument, they will no doubt point to the historically low unemployment numbers, but it’s not at all clear that generalized economic statistics will have much impact on the votes of individual voters. Additionally, polling has shown that voters perception of the economy is largely based in their partisan leanings, with Democrats and many independents being far less positive about the state of the economy than Republicans.

In addition to voters, another audience paying attention to these numbers are, of course, the people at the Federal Reserve, which is still following its policy of occasional small interest rate hikes meant to keep the economy from overheating and inflation to grow at the consumer or wholesale level, something that could easily happen in the face of a tightening labor market and strong economy. If that happens, then the Federal Reserve could end up raising rates at a faster pace, which could lead to an economic slowdown.  At this point, there’s no sign this is happening. The Federal Reserve did raise rates in September as it had been expected to do but Federal Reserve Board Chairman Jerome Powell also noted at the time that the economy appeared to be growing, but not growing too rapidly. Notwithstanding that, these numbers appear to make it more likely that we’ll see a rate increase come December, or perhaps sooner.

In any case, there’s no question that this is a positive number and one that continues to indicate that the recovery, which now represents the second longest in American history behind only the expansion that lasted from March 1991 to March 2001. The difference, though, is that this expansion has been signiicantly less robust. While the recovery of the 1990s saw average annual jobs growth of +2.0% and Gross Domestic Product growth of +3.6%, the current reovery has average employment growth of just 1.4% per year and GDP growth of +2.2% (Source). For the time being at least, it also indicates that things should continue moving in a positive direction. At some point, though, we’re likely to hit a point where things start heading south, especially if the President’s trade war continues. How strong the economy will remain at that point will be an important thing to watch for both after the midterms and as we get closer to the 2020 election.

FILED UNDER: Campaign 2018, Congress, Donald Trump, Economics and Business, Politicians, US Politics,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Eric Florack says:

    Question is how long can those numbers last?

    The answer is that’s the kind of question pose by somebody’s desperately looking for bad news that they’ve been looking forward to for over a year.

    and remember, this is the economy that Obama said was never coming back. not only did the jobs report to exceed expectations, it’s trippled those expectations.

    Rather makes one wonder what it’s going to take to get The Usual Suspects to admit that conservative policies actually worked as promised and that their policies were wrong.
    And yeah yeah yeah, I know, down vote City. So what else is new?

    ReplyReply
    4
    9
  2. Guarneri says:

    Its a good report, however some may try to spin it. However, one doesn’t know whether to laugh or cry at the handwringing over meager wage growth the past 10+ years………………right on the heels of a piece calling out the administration’s wage enhancing desires to limit immigration, as “demonization of immigrants.”

    ReplyReply
    1
    4
  3. Just nutha ignint cracker says:

    Rather than the jobs number, though, most analysts have been keeping an eye on wage growth, which has remained stubbornly lagging for the better part of the past two or three years decades.

    FTFY. Additionally of course, the reason that wages continue to stagnate even as we approach what we imagine to be the full employment mark is because Eric is at least partially right (surprisingly enough). Conservative policies actually work–just not a promised. They’re really good a maintaining capital preservation at the top of the pyramid, but the trickling down part never seems to happen. I wonder why (and why Eric keeps lying deluding himself about that part–just not as much)? Hmmm…

    ReplyReply
    4
    1
  4. Daryl and his brother Darryl says:

    @Eric Florack:
    @Guarneri:
    How do you sycophants explain that more jobs were created in Obama’s last 21 months than in Dennisons first 21 months?
    4,477,000 versus 4,054,000? Or ~20,000 jobs a month slower?
    How do you explain slower growth, in spite of a $1T giveaway to the wealthy and corporations?
    That’s not spin…that’s fact. But I’m sure you’ll come up with some spin….

    ReplyReply
    9
    2
  5. Daryl and his brother Darryl says:

    @Eric Florack:

    this is the economy that Obama said was never coming back

    Please link to that quote.
    Either produce it, or STFU.

    ReplyReply
    5
    2
  6. Daryl and his brother Darryl says:

    @Guarneri:

    wage enhancing desires to limit immigration

    Please explain, using actual facts and data, how limiting immigration enhances wages?

    ReplyReply
    4
    2
  7. Mikey says:

    @Daryl and his brother Darryl: Don’t bother. It’s an out-of-context misquote of something Obama said, that the idiot right has latched onto as if it proves something.

    But morons gotta moron, so.

    ReplyReply
    8
    3
  8. @Eric Florack: Never Trumpers will always find a way to be against Conservative/Republican policies simply because Trump is in office.

    ReplyReply
    1
    6
  9. Just nutha ignint cracker says:

    @William Teach: Be fair. Some of us will be against Conservative/Republican policies on basic principles. Not all Never Trumpers are Republicans, you know.

    ReplyReply
    10
  10. Daryl and his brother Darryl says:

    @William Teach:
    Same question to you, pirate boy…how do you explain that job growth was stronger in Obama’s last 21 months, than in Dennison’s first 21 months?
    Explain for us how your Dear Leader actually slowing job growth is a good thing?
    Please…I want to know how producing 423,000 fewer jobs in the same period of time is a win.

    ReplyReply
    5
    2
  11. Just Another Ex-Republican says:

    I don’t think Doug has EVER been completely happy with a jobs report. He caveats and worries about every one, and has as long as I can remember. A lot of commentators used to go crazy during the Obama years that he wasn’t as happy as they thought he should be.

    And I know for a fact that several of the trolls posting today were here back then, and somehow didn’t have a problem with it.

    ReplyReply
  12. Eric Florack says:

    @Daryl and his brother Darryl: that’s simple enough it takes a while to repair the damage.

    also consider the majority of the jobs being created under Obama were part-time jobs and minimum wage at that. Not so today.

    You really sure this is the argument you want to present?

    ReplyReply
    3
    9
  13. Teve says:

    @Just Another Ex-Republican: I was surprised this time when he put ” It’s unclear, though, how long these numbers can be sustained.” in the subhead, instead of the last part of the headline, as is de rigueur.

    ReplyReply
  14. Daryl and his brother Darryl says:

    @Eric Florack:
    Where’s that quote you racist fvck?
    Until you provide it you should just STFU.

    ReplyReply
  15. Tyrell says:

    Around here there are “help wanted” signs everywhere. We even get phone calls from companies needing workers. Housing construction is full speed and a large mill has re – opened. I am concerned about the retails. Too many stores going out.
    After years of price increases, our health insurance costs are the same. My prescription went from $20 for three months to $4!
    There’s a lot going right.

    ReplyReply
  16. Eric Florack says:

    “When somebody says like the person you just mentioned who I’m not going to advertise for, that he’s going to bring all these jobs back. Well how exactly are you going to do that? What are you going to do? There’s no answer to it,” Obama said, refusing to even say Trump’s name.

    “He just says, ‘I’m going to negotiate a better deal.’ Well how? How exactly are you going to negotiate that? What magic wand do you have? And usually the answer is, he doesn’t have an answer,” Obama continued condescendingly.

    So, abracadabra.
    It’s not out of context. Obama had no clue about jobs nor any care about jobs. he had no clue as to how to deal with the economy because he thinks everything is government driven.

    Along Comes Trump and gets government out of the way and in the doing creates more jobs than Obama’s worst nightmare.

    That’s not because of Any serious virtue on the part of trump, but rather it shows the value of getting government out of the way. There’s no more denial, nothing the left can say anymore. Their policies are wrong always have been wrong and we are living in the proof of it

    ReplyReply
    2
    5
  17. Eric Florack says:

    @Daryl and his brother Darryl: I don’t care what color the big government type is. I know the charge of racism is supposed to remove all the air from the room, thereby giving you an advantage. But the fact of the matter is race has nothing to do with any of this. Nice try at a smokescreen though

    ReplyReply
    2
    4
  18. Eric Florack says:

    @Just nutha ignint cracker: the point you seem to be missing is that wages have gone up more than they have in the last 10 years. Wages are not driven by laws, they’re driven by economic activity. The fact of the matter is Obama never calculated with that, which in turn resulted in wage stagnation.

    But no worries, that’s been dealt with

    ReplyReply
    2
    5
  19. Eric Florack says:

    @Just nutha ignint cracker: the point you seem to be missing is that wages have gone up more than they have in the last 10 years. Wages are not driven by laws, they’re driven by economic activity. The fact of the matter is Obama never calculated with that, which in turn resulted in wage stagnation.

    But no worries, that’s been dealt with.

    And by the way all this is not because Trump is so good at what he does but that Obama was so bad.

    In fairness, anyone who believes that government is the solution to economic issues would perform equally badly. But then again, that’s precisely the point I’m making.

    ReplyReply
    2
    5
  20. Eric Florack says:

    Let me put it this way…

    The problem isn’t Obama, and the solution isn’t Trump.

    The problem is government and the solution is reducing it in power and scope and essentially getting it out of the way.
    we are living in the proof of that now and there is nothing that the left can say to counter it. No more excuses.

    ReplyReply
    3
    5
  21. Just nutha ignint cracker says:

    @Tyrell: Meanwhile, the current unemployment rate in my little corner of this “greatest nation ever placed on God’s green earth” (h/t: Michael Medved) is 6.2% and nobody has signs anywhere noting that they’re hiring, no one hires phone solicitors asking if we want jobs, and the only positions regularly listed as available are for Uber drivers in the major city 70 miles away. Your community is very lucky.

    ReplyReply
  22. Guarneri says:

    @Daryl and his brother Darryl:

    You have heard of this concept called supply and demand, correct?

    ReplyReply
  23. grumpy realist says:

    @Eric Florack: “increases in salaries”? Yeah, right. Not around here, bub.

    ReplyReply

Speak Your Mind

*