The Corner

Economy & Business

A Look at October’s Job Numbers

Payrolls didn’t bounce as much as expected in October, but the report was still good news about the U.S. economy.

Nonfarm payrolls increased 261,000 in October, falling short of the consensus expected 313,000. However, the past two months were revised up a hefty 90,000. Combined with the increase in October itself, that’s a gain of 351,000. Notably, last month’s report that payrolls fell in September due to the hurricanes has been revised away, with payrolls up 18,000 for the month. The best way to think about it is that the storms didn’t cut jobs by as much as previously thought, so the recovery bounce didn’t need to be as sharp.

Not all the news on the labor market was good, however. Civilian employment, an alternative measure of jobs that includes small-business start-ups, declined 484,000 in October. But that follows a 906,000 surge in September, and civilian employment is still up 203,000 per month in the past year, versus a gain of 167,000 per month for payrolls.

Despite the drop in civilian employment in October, the jobless rate fell to 4.1 percent, the lowest since 2000, as the size of the labor force declined 765,000. But don’t believe the line that the jobless rate has only been falling due to fewer workers. The labor force is up 1.2 million in the past year even as the unemployment rate has declined from 4.8 percent to 4.1 percent.

Notably, the U-6 unemployment rate, which includes discouraged workers and part-timers who want full-time work, fell to 7.9 percent, the lowest since 2006, before the financial panic.

Some pessimists will focus on average hourly wages, which were unchanged in October. But wages popped 0.5 percent in September and this was just payback. We like to follow total earnings, which combines the total number of hours worked and average hourly earnings, and total earnings are up 4.1 percent from a year ago, signaling plenty of growth in consumer purchasing power.

Overall, this report will not derail the Fed along its path of another rate hike on December 13 and three more in 2018. Meanwhile, with the House GOP able to come together on a tax plan, we think the odds of tax cuts and tax reform are rising, which will only add to the bullish outlook for equities and the odds of rate hikes in the coming years.

Robert Stein is an economist for an asset-management firm and a former deputy assistant Treasury secretary for macroeconomic analysis.

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