Strong October Jobs Report Implicates Fed Policy, Role Of The Economy In 2016 Election

A much stronger than expected October Jobs Report suggests that the Federal Reserve is likely to move on interest rates, and raises questions about how economic issues will play out politically in 2016.

Now Hiring Sign

After several months of jobs reports that could be described as fair to middling at best, the October Jobs Report released today came in far stronger than even the most optimistic analysts were expanded, and seems to make it inevitable that the Federal Reserve will modestly increase interest rates before the end of the year:

Total nonfarm payroll employment increased by 271,000 in October, and the unemployment rate was essentially unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction.

Both the unemployment rate (5.0 percent) and the number of unemployed persons (7.9 million) were essentially unchanged in October. Over the past 12 months, the unemployment rate and the number of unemployed persons were down by 0.7  percentage point and 1.1 million, respectively. (See table A-1.)

Among the major worker groups, the unemployment rates for adult men (4.7 percent), adult women (4.5 percent), teenagers (15.9 percent), whites (4.4 percent), blacks (9.2 percent), Asians (3.5 percent), and Hispanics (6.3 percent) showed little or no change in October. (See tables A-1, A-2, and A-3.)

(…)

Total nonfarm payroll employment increased by 271,000 in October. Over the prior 12 months, employment growth had averaged 230,000 per month. In October, job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction. (See table B-1.)

Employment in professional and business services increased by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months. In October, job gains occurred in administrative and support services (+46,000), computer systems design and related services (+10,000), and architectural and engineering services (+8,000).

Health care added 45,000 jobs in October. Within the industry, employment growth continued in ambulatory health care services (+27,000) and in hospitals (+18,000). Over the past year, health care has added 495,000 jobs.

Employment in retail trade rose by 44,000 in October, compared with an average monthly gain of 25,000 over the prior 12 months. In October, job gains occurred in clothing and accessories stores (+20,000), general merchandise stores (+11,000), and automobile dealers (+6,000).

Food services and drinking places added 42,000 jobs in October. Over the year, the industry has added 368,000 jobs.

Construction employment increased by 31,000 in October, following little employment change in recent months. Employment in nonresidential specialty trade contractors rose by 21,000. Over the past 12 months, construction has added 233,000 jobs.

Employment in mining continued to trend down in October (-5,000). The industry has shed 109,000 jobs since reaching a recent employment peak in
December 2014. Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, information, financial activities, and government, showed little or no change over the month.

In other areas, the report showed modest increased in average hours worked and the average work week, but also showed that average hourly earnings had increased nine cents over the month and that the total change in hourly earnings over the past year has been 2.5%, a fairly healthy number given the fact that inflation has been largely non-existent during this period. This last numbers seems to put to rest, at least for now, some of the complaints about previous jobs reports that showed modest increases in wages even when most of the other numbers were generally positive. Today’s news suggests a long term trend of acceleration in wage growth, which is obviously good news. Additionally, there were modest increases in the jobs numbers for the previous two months of +12,000 jobs over the two months. This puts the average job gains per month at 187,000 per month for the past three months, and 230,000 per month over the past twelve months. Additional positive news includes the fact that the broader U-6 unemployment rate now stands at 8.9% versus 11.5% a year ago, that the number of people working part-time involuntarily is dropping steadily, and full-time employment is now at levels it was before the start of the Great Recession.

The New York Times is typical of the coverage of the morning, which is generally quite positive:

The American economy added 271,000 jobs in October, a very strong showing that makes an interest-rate increase by the Federal Reserve much more likely when policy makers meet next month.

he report on hiring and unemployment, released Friday by the Labor Department, was eagerly anticipated on Wall Street, where traders and economists have been sifting each new bit of economic data for any augury of the central bank’s course.

The unemployment rate dipped to 5.0 percent, from 5.1 in September.

At this level, the unemployment rate is close to what would normally be considered the threshold for full employment by the Fed and many private economists.

However, the so-called slack that built up in the labor market after the recession has altered traditional calculations of how far unemployment can fall before the job market tightens and the risk of inflation rises.

This week, Janet L. Yellen, the chairwoman of the Fed, told a panel on Capitol Hill that an increase in December was a “live possibility” if the economy continued to perform well.

Still, Ms. Yellen left herself and the rest of the Open Market Committee of the Fed plenty of wiggle room, emphasizing that no decision had been made on whether to raise rates for the first time in nearly a decade. Indeed, they will have an additional jobs report for November in hand by the time they gather for their last meeting of the year, on Dec. 15 and 16.

While some other economic statistics, including the recently released preliminary third quarter Gross Domestic Product numbers, seemed to suggest that the economy may still be suffering from some of the same weaknesses that we saw during the summer which caused the Federal Reserve to delay an expected rate increase in September, and again in October. If these numbers are indicative of the data that the Fed is looking at, though, then they would arguably go ahead with the rate hike they’ve been hinting at for the better part of 2015 and which, to be frank about it, is probably well overdue given the fact that interest rates have been at largely unsustainable historic lows for the past six years or more. It likely wouldn’t be a large increase, of course, but it would be significant given the amount of time that has elapsed since the last saw the Federal Reserve increase rates even slightly.

Beyond Federal Reserve policy and Wall Street, of course, we’re now at the point where the state of the economy is likely to start having an influence on the races for the White House, Senate, and House and the manner in which the candidates approach the issues. In that regard, the American Enterprise Institute’s Jim Pethokoukis posed these points on Twitter after the report was released:

Quite often, of course, voters perceive the economy based more on their personal economic situation than on economic statistics or what might be happening in Silicon Valley or other sectors of the economy. Nonetheless, Pethokoukis, who is a conservative working at a conservative think tank, raises valid points about the impact that the state of the economy could have on the election next year if these numbers are harbingers of a trend, and how exactly Republicans would be able to square their message that the Obama Administration has hobbled the economy with information that suggests the economy is, in fact, doing quite well as we enter the seventh year of the recovery from one of the biggest economic downturns the United States had experienced since the Great Depression.

FILED UNDER: Campaign 2016, Economics and Business, Hillary Clinton, 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. Moosebreath says:

    “Again, GOP couldn’t beat Obama with 8% unemployment.”

    And Romney promised to reduce it to 6% in his first term. Shows how well Republican economic policies work. /snark off

  2. OzarkHillbilly says:

    Krugman disagrees:

    Does today’s good job report mean that the Fed will raise rates next month? Probably yes. Does it mean that the Fed should raise rates? Definitely not. The arguments against an early rate rise remain compelling, and shouldn’t be abandoned based on one month’s data.

    Go read the rest. Agree or not, you can not ignore his points.

  3. There are assuredly good arguments against raising rates, but the rise is going to happen at some point, it’s inevitable whether it happens in December or March. And a 1/4 point increase is unlikely to have the kind of impact that Krugman seems to fear, except perhaps to the extent it changes investment behavior and causes businesses and consumers to act now to lock in lower rates for loans.

  4. OzarkHillbilly says:

    Funny, 2 earlier posts of mine got caught in the spam filter, these 2 sneak thru. shakes head

  5. Jordan Parker says:

    Once again, Obama proves to be a complete failure at being a socialist out to destroy capitalism.

    Dow over 17,000, record corporate profits, 5% growth, best year for jobs since 1999, consumer confidence up, deficit down 60% in 2014, gas prices low, health insurance cheaper than ever ($85/month), car insurance cheaper than ever ($25/month from Insurance Panda), the 1% starting to be taxed more… all while republicans bleated about Benghazi took pointless votes to repeal the ACA, and did nothing for anybody except the top one percent.

    It turns out that Obama is indeed “the adult in the room,” and yes, the Chess Master. HRC will keep it going, any republican will screw it up. Simple as that.

  6. markm says:

    Quite often, of course, voters perceive the economy based more on their personal economic situation than on economic statistics or what might be happening in Silicon Valley or other sectors of the economy.

    That.
    You have Presidential candidates on both sides of a aisle bemoaning our current economic situation as being far less than ideal…clearly not what you would expect for a 5% unemployment number.

    Back pocket economics tell the tale.

  7. @OzarkHillbilly:

    Rescuing those posts as I type. It seems the filter still acts buggy at times. Thanks for the patience.

  8. Hal_10000 says:

    Clearly this the result of (Republican’s/Obama’s) excellent economic management overcoming the damaging impact of (Republican austerity/Obamacare). This clearly means we should support (Clinton/[insert name of Republican here]) in the next election.

  9. Ron Beasley says:

    Here in the Portland area our largest employer, Intel, has quit hiring. Intel’s largest facility in the world is located here. The microprocessor in your computer was designed here and probably first built here. But thanks to tablets and smart phones the demand for PCs has declined. In addition we have reached the limit on silicon based substrates. There has been no real increases in power or speed for several years. Intel is a very innovative company and I would bet they are researching non silicon computer products.
    I’m an old fart and while I own a tablet I haven’t used it for months.. I have a smartphone but primarily use it as a phone and to send text messages. My first choice is still my desktop computer and the 25″ monitor.

  10. Andre Kenji says:

    To me that´s a good argument for raising wages.

  11. Slugger says:

    I think that the economy is pretty complicated and actually not well understood by the great experts who offer us their opinions. Politicians certainly use the economy as a springboard for their sloganeering which is designed to appeal to our guts not our minds. Overall the trend of the American economy has been positive over a long time framework with stochastic short term trends. I do think that Obama deserves credit for holding down and even reducing the number of federal employees, but almost no conservative commentator ever mentions this just as they never mention the whittling down of the annual deficits.
    There is a trend toward the hollowing out of the middle class which causes the anger apparent in the Trump voter phenomenon. When I see positive reports on the economy, increases in productivity are frequently cited. If outputs go up while wages are steady or declining, then the conditions for increased productivity are met.
    Before we pat Obama on the back for this job report, let’s look at the long term trends in America and let’s at median family income. George the lesser may have been so bad that most successors would have looked good.

  12. Jeremy R says:

    http://www.theguardian.com/business/2015/nov/06/us-jobs-unemployment-rate

    “The national economy is fast approaching full employment. Underlying job growth – abstracting from the monthly vagaries of the data – is close to 175,000 per month,” [Mark Zandi, chief economist at Moody’s analytics] said.

    “At this pace, if sustained, which seems likely, the economy will be at full employment by next summer.”

  13. stonetools says:

    Krugman is generally always right, and so I’ll go with his take. Fortunately, Janet Yellin is likely to agree with Krugman, and thus will resist the inflation hawks who seem to be still living in 1979. I don’t see her going with a rate hike until we see at least three consecutive months of rising wages.
    BTW, Doug, will there ever come a time when you admit that Obama’s stewardship of the economy has been quite good and that he has done a solid job of steering the US economy out of the 2008 financial collapse? (He would have done even better absent what amounted to Republican sabotage tactics, but I don’t expect you to ever go that far).
    In any case, it eventually percolate down even to the Fox News faithful that the economy is doing quite well and that Republicans’ predictions of economic disaster have once again failed to come to pass. Obama will get credit for that, despite the best efforts of Fox News and talk radio. Clinton can credibly promise more of the same, whereas the Republicans are going to have to justify why they want to return the US back to a program that will look suspiciously like the Bush economic plan that led to the 2008 crisis.

  14. steve s says:

    BTW, Doug, will there ever come a time when you admit that Obama’s stewardship of the economy has been quite good and that he has done a solid job of steering the US economy out of the 2008 financial collapse?

    HAHAHAHAHAHAHAHAHAHA are you new here?

  15. Jeremy R says:

    @stonetools:

    Obama will get credit for that, despite the best efforts of Fox News and talk radio.

    It often seems like much of the Left is nearly as invested in talking down positive economic news as is the Right (and similarly suspicious of it as well). That partisan environment makes it extremely difficult for the Dems to get any credit for the economy doing relatively well.

  16. OzarkHillbilly says:

    @Doug Mataconis: Thanx Doug. I don’t even bother notifying either you or James anymore as it just doesn’t seem worth the trouble. For about the past week or so I have actually gotten a few comments thru, tho it seems the majority hit the spam filter. shrug It’s an irritation but hardly the end of the world.

  17. C. Clavin says:

    @Hal_10000:
    Do tell…I’d love to hear about the damaging impact of Obamacare.
    It’s been a while since I’ve read a right-wing nut-job site.
    Please update us on the latest myth!!!

  18. Tyrell says:

    @stonetools: The job growth situation around here is slow, tepid, and dismal. Once full running textile mills are now empty hulks. The “recovery” brought such career opportunities as foor to door vacuum cleaner sales, shoe store associates, sidewalk cleaners, and cotton candy machinery operators. Wages have been flat for years. The fast food places have lines every week to fill out applications. Little or no new construction.

  19. C. Clavin says:

    @Doug Mataconis:
    Agreed…a little inflation is needed…and being at zero interest leaves us not room to maneuver when we need to.

  20. C. Clavin says:

    @Tyrell:
    So why do you keep voting Republican…they are the ones keeping wages flat.

  21. C. Clavin says:

    Good jobs report…once again Government hiring is flat.
    One only need look at this chart to understand the damage Republicans are intentionally inflicting on the economy.
    http://stateofworkingamerica.org/charts/total-job-change-for-public-sector-workers-since-the-start-of-each-of-the-last-four-recoveries/

  22. steve s says:

    Wages have been flat for years.

    yeah, approximately 35 years. You might want to look into that.

  23. steve s says:

    @C. Clavin: We all remember that in the heart of the crisis, republicans said their number one priority was…hurting Obama.

  24. C. Clavin says:

    68 straight months of private-sector job growth, the longest such spell on record.
    Pretty good for a Kenyan socialist.
    Can we finally stop believing anything Republicans say about anything???

  25. steve s says:

    Can we finally stop believing anything Republicans say about anything???

    Most intelligent people realized quite a while ago that republicans are now the party of stupid lies.

  26. JohnMcC says:

    @Tyrell:
    @C. Clavin:

    Our small town and apparently southern friend Tyrell is describing the left-behind (and not from the rapture) small town and rural white population that was found to have elevated rates of opiate addiction, alcoholism and joblessness. You remember? The only demographic in the advanced world with a declining life expectancy? The increased number of suicides?

    http://www.theatlantic.com/health/archive/2011/05/boomer-deaths-pnas/413971/

  27. anjin-san says:

    @steve s:

    yeah, approximately 35 years.

    History started in 2008. That is all.

  28. Guarneri says:

    Ah yes, another report highlighting the growth of the waiter and bartender crowd. No robust wage growth will come out of that. In the “Obama Recovery” as many waiter and bartender jobs created as manufacturing jobs lost.

    But cheer on.

  29. grumpy realist says:

    @Guarneri: Well, the question is, what should we do about that?

    If we want manufacturing jobs back here in this country, the only way I can see we do is by putting tariffs or lock out stuff manufactured abroad.

    You game? We’re going to a hell of a lot of screeching from the FreeMarket (TM) types, however.

  30. stonetools says:

    @Guarneri:

    Wrong again, Bob. Read the OP:

    In October, job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction. (See table B-1.)
    Employment in professional and business services increased by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months. In October, job gains occurred in administrative and support services (+46,000), computer systems design and related services (+10,000), and architectural and engineering services (+8,000).
    Health care added 45,000 jobs in October. Within the industry, employment growth continued in ambulatory health care services (+27,000) and in hospitals (+18,000). Over the past year, health care has added 495,000 jobs.

    Man, when have you EVER been right?OK, you’re right in that food services jobs did increase. But so did lots of other higher paying categories.

  31. C. Clavin says:

    @Guarneri:
    Every month you predict gloom and doom.
    A record 68th straight month of private sector job growth, best wage growth in 6 years.
    And here you are whining again, and offering no solutions to the damage your party is doing.
    What do you suggest? A tax cut for the rich? Yeah, baby, how ’bout some a dat trickle down voodoo stuff.
    Figures.

  32. C. Clavin says:

    @Hal_10000:

    Clearly this the result of (Republican’s/Obama’s) excellent economic management overcoming the damaging impact of (Republican austerity/Obamacare).

    @C. Clavin:

    Do tell…I’d love to hear about the damaging impact of Obamacare.

    Crickets….

  33. michael reynolds says:

    @stonetools:

    Yeah, but see, the 6% unemployment Guarneri’s boy Mitt was promising would have been all tool-and-die makers, coal miners, steel manufacturers and financial whizbangs. No waiters. Because magic.

  34. Guarneri says:

    About that meme of a declining labor force participation rate due to retiree/baby boomer demographics you guys have also been peddling.

    http://www.zerohedge.com/news/2015-11-06/most-surprising-thing-about-todays-jobs-report

  35. Guarneri says:

    And in other great economic news, ObamaCare is “working as intended.” (Snicker). $2500 premium reduction my achin’……..

    http://hotair.com/archives/2015/11/05/not-your-imagination-obamacare-premiums-shot-up-by-double-digits-for-2016/

    When one considers all medal levels, estimates of premium increases range from 14-20%. And that doesn’t even figure in higher deductibles, de facto premium increases. No wonder the older set keep working and the young don’t sign up. Just what a politician concerned about income inequality would “intend.”

  36. stonetools says:

    @Guarneri:

    Someone is signing up. The rate of uninsured has declined to its lowest level ever.

    The new data comes from the National Health Interview Survey, which the CDC and the Census Bureau have been conducting for more than 50 years. The questions have changed over the years, but the answers were always the same: More than 10% of respondents, and sometimes as many as 18% of Americans, have reported that they’ve been uninsured.

    Not anymore. This is the second straight survey to find that America’s uninsured rate is now in the single digits. More than 20 million previously uninsured Americans have gained coverage in the past five years.
    And every new survey makes the connection to the Affordable Care Act even more obvious. You can see America’s uninsured rate significantly decline in 2014, when Obamacare’s coverage expansion programs began to kick in.

    So says effing Forbes magazine. That didn’t happen because nobody is signing up. That rate would be lower still if a bunch of Republican a$$hole governors and state legislators hadn’t refused to accept expanded Medicaid.
    Oh well, at least you maintain your 100 per cent wrong record. Are you sure your real name isn’t Kristol?

  37. stonetools says:

    I’d also like to remind our conservative brethren that the current unemployment rate is lower than anytime during the reign of Saint Ronaldus Maximus, making Obama superior in that regard to the greatest conservative President ever!

    As Tom Friedman would say, suck on that!

  38. Tyrell says:

    @stonetools: How does it stack up to Kennedy, Johnson, Carter ?

  39. Matt says:

    @Ron Beasley: Oh there’s plenty of room for improvements in CPU design. It’s not going to be like in the past where speeds are dramatically faster each generation. There will still be improvements to be made.

    My primary machine is powered by an AMD though.

    I have friends who work at Intel. Intel is continuing to develop the desktop CPU along with other mobile variations. More importantly though intel is continuing to push tech in other areas. AS witnessed by the 3d memory technology that Intel has developed with Micron. Expect more such developments in other technologies.

  40. Tyrell says:

    @Matt: There is the on going argument about which is best: AMD or Intel processors.

  41. Matt says:

    @Tyrell: Best depends on your scenario.

    Essentially
    AMD CPUs are slower per core than Intel.
    AMD CPUs have more cores at a lower cost than Intel.

    If you’re doing stuff that has lots of multi-threading or multitasking involved then AMD can be quite cost effective.

    If you have the money to spent then Intel is the superior choice.

  42. Stan says:

    @Guarneri: “When one considers all medal levels, estimates of premium increases range from 14-20%. And that doesn’t even figure in higher deductibles, de facto premium increases.”

    Would this improve if your guys win and repeal the Affordable Care Act? If so, why?