WASHINGTON, DC—The Labor Department made a lot of US economy watchers very happy this morning. October’s job creation rate was the fastest for the year, outpacing expectations of another marginal month.
It reported that 271,000 jobs were created in the month, with the unemployment rate remaining unchanged at 5%. Over the prior 12 months, employment growth had averaged 230,000 per month. Also, given the depressing numbers of the last two months and other economic indicators highlighting stagnant growth (manufacturing, for example) expectations were low for October. The 271,000 surpassed many economists’ expectations for the month.
Industry sectors that experienced gains were concentrated in the office-using sector.
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.
Administrative and support services added 46,000 jobs; computer systems design and related services added 10,000; and architectural and engineering services added 8,000.
Construction Rocks
Construction also saw an increase in job creation, by 31,000 in October, following little employment change in recent months. Employment in nonresidential specialty trade contractors rose by 21,000.
This was the biggest gain in construction payrolls since February 2015, Fannie Mae Economist Doug Duncan pointed out. In general, he said, the October jobs report is a positive for housing for several reasons and he expects the housing market to continue to improve with a stronger overall economy.
The 31,000 new construction workers added to payrolls has brought the industry’s unemployment rate to 6.2%, the Associated General Contractors of America says.
Construction employment is now at the highest level since February 2009, it also said. As for the hiring slowdown experienced during the summer, that was due more to labor shortages than to a slump in demand, said Ken Simonson, the association’s chief economist. “Construction firms appear to have had an easier time finding workers in October than they did during the summer.”
A December Rate Increase?
The report also inclluded revisions to the August and July employment numbers that amounted to a net 12,000 jobs added. August figures were revised from 136,000 jobs created to 153,000, and the change for September was downwardly revised from 142,000 jobs created to 137,000.
Another statistic of note from the morning’s report: wages rose by 9 cents an hour or an annualized increase of 2.5%. This upward pressure on wages is a metrics the Federal Reserve Bank will consider as it weighs whether to raise interest rates in December.
Earlier this week Fed Chair Janet Yellen said that there was a “live” possibility that December would be the month the Fed would pull the trigger on a rate increase. One might conclude from this morning’s report that an interest rate increase is in the offing for this year after all.
But this is only one report, notes Lindsey M. Piegza, Chief Economist at Stifel. This morning’s strength in hiring will need to be confirmed by the November report at the very least, she said. “After all, today’s strength comes against the back drop of back-to-back months of weakness in August and September, so this new, presumed trend of improvement will need at least a second month of confirmation.”
