Payrolls in US rise by 161,000 in October as wages accelerate
Figures likely to keep the US Federal Reserve on track to increase borrowing costs next month
US jobs continued to gain at a steady pace in October and wage gains accelerated, signs that the labour market and economy made steady progress at the start of the fourth quarter.
Payrolls climbed by 161,000 last month following a 191,000 gain in September that was larger than previously estimated, a Labour Department report showed Friday. The median forecast in a Bloomberg survey called for 173,000. The jobless rate fell to 4.9 per cent, while wages rose from a year earlier by the most since 2009.
The figures are likely to keep the US Federal Reserve on track to raise borrowing costs next month for the first time in 2016. Underlying the steady gains in employment is a balance between hiring managers’ need to keep up with stable domestic demand and the struggle to match more limited labour to skilled-job vacancies.
“As it continues to tighten up, firms are going to have to resort more and more to more attractive pay to draw people in,” Stephen Stanley, chief economist at Amherst Pierpont Securities in New York, said before the report. “We are pretty close to full employment.”
Workers have been in short supply for 13 straight months, according to the Institute for Supply Management survey of service-industry companies, which make up almost 90 per cent of the economy.
The median forecast in a Bloomberg survey called for a 173,000 advance in payrolls. Estimates in the Bloomberg survey ranged from gains of 105,000 to 208,000 after a previously reported 156,000 September increase.
Revisions added a total of 44,000 jobs to payrolls in the previous two months.
The unemployment rate, which is derived from a separate Labour Department survey of households, dropped from 5 per cent the prior month, returning to its level from August.
While economists and policy makers largely agree that the US economy is close to full employment, blemishes remain, with the ranks of part-time workers and long-term jobless still higher than before the last recession.
The labour force participation rate, which indicates the share of working-age people who are employed or looking for work, slipped to 62.8 per cent from 62.9 per cent, as the number of people in the labour force declined.
The government’s underemployment rate dropped to 9.5 per cent in October from 9.7 per cent, while the number of people working part-time for economic reasons was little changed, according to Friday’s report. Some 5.89 million American employees were in part-time jobs but wanted full-time work.
Wage gains picked up, with average hourly earnings rising 0.4 per cent from a month earlier to US$25.92. The year-over-year increase was 2.8 per cent, compared with 2.7 per cent in the year ended in September.
The average work week for all workers was unchanged at 34.4 hours in October.
Among service providers, education and health services led with an increase of 52,000 jobs, followed by professional and business services at 43,000. Retailers pared payrolls by 1,100.
Factories reduced payrolls by 9,000 after an 8,000 decline the month before, in line with a report earlier this week that showed manufacturing barely expanded in October while orders moderated. Employment at construction companies rose by 11,000. Governments added 19,000 workers.
Friday’s figures showed 238,000 Americans weren’t at work because of weather during the survey week, even though they were counted as employed in the household survey, the agency said. Bad weather can affect the payroll count if employees didn’t receive compensation for the entire pay period that included the 12th of the month.
Hurricane Matthew’s assault on the East Coast was just fading at the start of the week with the 12th. The storm moved up the Florida coastline on October 7 before making landfall in South Carolina the following day and continuing on to North Carolina, causing flooding and power outages along the way.
The labour-market figures offer a last big hint at the direction of the economy before Americans flock to the polls November 8.
Figures released last week on the third-quarter pace of growth offered a mixed picture. While gross domestic product increased at a 2.9 per cent annualised rate for the strongest pace in two years, inventory rebuilding and a soya bean-related jump in exports largely fueled the rebound. Consumer spending slowed more than expected.
US Fed policy makers who concluded a two-day meeting Wednesday in Washington offered an assessment of the economy that was broadly similar to their September statement, reinforcing the consensus view that they will raise the benchmark interest rate in December for the first time this year.
The central bankers reiterated that the “labour market has continued to strengthen and growth of economic activity has picked up” since the first half of 2016. Even so, they opted to wait for “some further evidence” of progress before increasing borrowing costs.