Well, the big jobs report is out showing payrolls grew by a more-than-expected 171,000 last month and the unemployment rate ticked up slightly, as expected, to 7.9%. Job growth for the prior two months was revised up by 84,000, and the average monthly pace of job growth over the past four months -- a useful way of smoothing out monthly noise in the data -- is 173,000, a sharp acceleration over the second quarter’s pace of 67,000 per month.
The uptick in unemployment was expected after September’s 0.3 percentage point drop, but a few things are worth noting. First, the 0.1 point increase is statistically indistinguishable from no change at all -- the unemployment rate has to rise or fall about 0.2 points to be significant. At 7.9%, the jobless rate is down significantly -- by one full point -- from its rate one year ago. Second, one reason for the slight uptick was that more people came into the labor market seeking work. We’ll need to see how this development evolves in coming months, but we may be seeing early signs of an improving job market pulling more job seekers in from the sidelines.
All told, given the acceleration in payroll growth, the upward revisions to prior months' payroll gains, the trend decline in unemployment and the pick-up in labor force participation, today’s report is generally pointing to a job market that’s showing signs of improvement.
Obviously, a report like this landing just a few days before a tight election is going to be a very big deal, and both campaigns will use the results in predictable ways. But if there’s anyone out there who’s making up their mind based on this one report, please don’t. Yes, the monthly employment numbers provide important information about the part of the economy that matters most to people, but that information must be considered as but one relatively noisy set of indicators amid a sea of others.
I always stress, as I did above, the importance of smoothing out some of the monthly noise by averaging over the past few months. As noted, employment growth slowed notably in the second quarter of this year, increasing by only 67,000 jobs per month, but it has since accelerated up to an average monthly gain of about 170,000 over the past four months.
–The effects of Hurricane Sandy are not included in these numbers as the October surveys were fielded well before the storm hit.
–Manufacturing added 13,000 jobs last month after shedding 14,000 and 13,000 jobs in the prior two months. Over the past year, factory employment is up by 189,000, and up about 500,000 since the sector began to recover in early 2010.
–Both hourly and weekly earnings are up, before inflation, by about 1.5% over the past year, trailing the recent trend in prices, up around 2% since last September. Average weekly hours have also been flat over the past few months, suggesting employers are meeting increased labor demand by adding workers rather then extending shifts.
–Most industries added jobs last month; professional services led with 51,000 jobs and retail stores added 36,000 jobs in October, compared to 27,000 and 18,000 in the prior two months, perhaps reflecting stronger consumer activity and confidence.
–Construction was up 17,000 last month, driven by both residential and commercial contract work. The sector is showing some early signs of the formerly moribund housing market coming back to life.
–Government employment, however, fell again in October, down 13,000. After posting large losses since the downturn, state and local payrolls have been essentially stagnant.