US jobs growth picked up after two straight months of slower gains as pandemic-related concerns that have kept workers on the sidelines eased, leading to “widespread” gains, particularly in the leisure and hospitality sector.
Employers in the world’s largest economy added 531,000 jobs in October, above the upwardly revised 312,000 positions created the previous month and closer to the roughly 580,000 monthly average seen since the start of the year. Economists had expected payrolls to increase by 450,000.
The unemployment rate took another leg lower in October, falling to 4.6 per cent. That is down from 4.8 per cent in September and well below June’s level of 5.9 per cent.
According to the Bureau of Labor Statistics, which published the data on Friday, jobs growth was “widespread” with “notable” gains across a number of sectors.
Leisure and hospitality jobs rose by 164,000 in October, driven largely by an increase in hiring for food and drinking establishments. That is the highest amount since July, though still 1.4m short of the pre-pandemic level.
Professional and business services added 100,000 jobs and manufacturing positions increased by 60,000, while employment at retailers ticked up by 35,000.
The private sector drove October’s gains, with state and local government payrolls “weak” for the month, according to Thomas Simons, an economist at Jefferies. He cited “seasonal variance” as schools reopened.
Employment decreased in local and state government education and state government education by 65,000.
“The stage is set for us to get back to roughly where we were pre-pandemic in the coming year,” said Tom Porcelli, chief US economist at RBC Capital Markets. “That is a high conviction call.”
In remarks delivered on Friday, US president Joe Biden said it was another “great day” in the recovery from the pandemic, crediting his stimulus plan passed earlier this year for laying the foundation for the gains.
“Our economy is on the move,” Biden said. He also urged Congress to pass his spending bills currently under debate, saying it will “end some of the anxiety people are feeling about the economy”.
The data come at a critical moment for the labour market recovery, which had lost some of its momentum in recent months.
While the unemployment rate has dropped significantly since June, the pace of job creation has also slowed dramatically since the summer, when the US economy was enjoying robust gains of about 1m new positions each month.
But the alarming spread of the more contagious Delta variant of Covid-19 cut short that progress, exacerbating an already acute worker shortage that left a record number of job openings unfilled.
Before this month’s revision, a gain of just 194,000 had been reported for September, well short of expectations at the time and a steep drop-off from previous periods.
Economists pointed to ebbing coronavirus cases nationwide over the past month and an expanded vaccination campaign as factors that are helping to ease many of the constraints that have deterred Americans from returning to the workforce, ultimately propelling payrolls growth in October.
The latest update on the US employment situation came just days after the Federal Reserve announced it will begin scaling back its $120bn-a-month asset purchase programme later this month, having achieved “substantial further progress” towards maximum employment and inflation that averages 2 per cent.
Despite reaching this milestone, Jay Powell, the Fed chair, stressed the US economy had more ground to make up before substantive steps to tighten monetary policy should be considered.
When asked about the Fed’s thinking on raising interest rates, Powell repeatedly highlighted that the labour market had not healed sufficiently to warrant such a move.
The central bank has said it will keep interest rates at today’s near-zero levels until it achieves maximum employment and inflation that averages 2 per cent over time.
There are still roughly 4m more Americans out of work compared with pre-pandemic levels, and the labour force participation rate — which tracks the number of Americans employed or looking for a job — has yet to recover fully.
The headline participation rate failed to budge from the previous month at 61.6 per cent, well below its level of 63 per cent in February 2020, according to Kevin Cummins, chief US economist at NatWest Markets.
For “prime age” workers between 24 and 54 years old, the situation has improved more significantly since the summer, Porcelli noted, but their participation rate remains roughly 1 percentage point shy of the pre-pandemic level of 82.9 per cent.
The employment-to-population ratio for these workers, which tracks the percentage of Americans in the age bracket who currently have jobs, improved in October, rising to 78.3 per cent from 78 per cent the previous month. That is the highest level since early 2020.
At the press conference following the two-day policy meeting on Wednesday, Powell said “impediments” to labour supply should “diminish” as Covid-19 risks faded further, perhaps leading to more significant increases in jobs again soon.
He added separately that it could be possible for maximum employment to be achieved by the second half of next year should the pace of this year’s gains continue.
Adding urgency to the Fed’s policy discussions is surging inflation, which has proven more persistent and broad-based than anticipated. Wages are also rising, with another boost seen in October.
Average hourly earnings rose 0.4 per cent on a month-over-month basis for a 4.9 per cent annual gain.
According to Powell, current inflationary pressures were not due to a “tight labour market”, however, and instead reflected supply-chain bottlenecks and other shortages.
Short-dated US government bonds sold off following the latest jobs numbers, with yields on the two-year Treasury note higher by 0.02 percentage points at 0.44 per cent. The yield on the benchmark 10-year Treasury bond, which moves inversely to its price, dropped 0.06 percentage points to 1.467 per cent in midday trading, as US equities markets pushed higher.
Source: Economy - ft.com
