The October job report showed solid growth in the U.S. labor market, with 531,000 nonfarm jobs added last month, but earnings increases are not keeping up with inflation.
The unemployment rate fell 0.2 percentage points to 4.6%, but the labor force participation rate remained at 61.6%, the same rate as a year ago, and well below the 63.3% in February 2020, the last month before the pandemic.
The number of unemployed fell 255,000 to 7.4 million, which is still 1.7 million more than February 2020.
The private sector added a healthy 604,000 jobs, the strongest number since July, and above the preceding three-, six-, and 12-month average increases. The service sector continues to lead the recovery, accounting for four out of five private jobs added in October.
Leisure and hospitality, the strongest sector for the month, almost doubled its job gains from the previous month, adding 164,000, but is still down a substantial 1.4 million jobs from February 2020.
Professional and business services was the second strongest sector for the month, adding 100,000 jobs.
Manufacturing added 60,000 jobs last month. The sector is 270,000 jobs (2%) lower than its February 2020 level.
Construction, which was flat from March to September, added 44,000 jobs in October and is now within 150,000 of its February 2020 level.
Transportation and warehousing added 54,400 jobs, its smallest increase since June. Although the sector is 3% above its February 2020 level and still growing, the labor shortage in the supply chain indicates the industry needs more workers.
Oil and gas extraction added only 1,200 jobs in October and coal mining saw no increase despite multi-year highs for energy prices. While oil and gas extraction has surpassed pre-pandemic levels, coal mining is still down 9% from February 2020.
Health care added 37,200 jobs for the month. Employment in the industry has been flat since December 2020 and remains 459,500 jobs below its February 2020 level.
Government jobs declined 73,000 in October, with government education falling 64,900, 89% of the total decline in the sector. Job declines were seen at the federal, state and local government levels.
Earnings, Revisions, Miscellaneous
Average hourly earnings rose for the seventh consecutive month in October, adding 11 cents to $30.96 while the average workweek fell slightly to 34.7 hours. Inflation has increased faster than wages over the last year.
August nonfarm payroll was revised up 117,000 to 1,091,000 and September was revised up 118,000 to 366,000. These combined revisions of 235,000 added to October’s 531,000 yield a total increase of 766,000.
Prime-age (25-54 years old) employment increased 400,000 to 98.7 million, which is 2.5 million below its February 2020 level.
The labor force participation rate remained stubbornly low at 61.6%, 1.7 percentage points below February 2020 and the same as October 2020.
Weekly Supplemental Unemployment Benefits
Half of the states ended their participation in the federal unemployment “bonus” program over the summer, while the other half continued participating until the end of the program in September 2021. October was the first month in which no one received the additional unemployment benefits, and job growth improved dramatically.
The latest available statistics show that workers are quitting their jobs at a record pace. While there is ample anecdotal evidence of workers leaving their jobs due to vaccine mandates, there is no official survey data on the topic, so it is unclear precisely how much of the current labor market situation is attributable to this factor. Nevertheless, the mandates are certainly not helping the labor shortage.
The strong jobs growth of the October report is undermined by inflation, which has grown faster than wages. Nonfarm employment is 4.2 million below the February 2020 level, and people are earning less in real terms than they did a year ago. The unemployment rate and the number of unemployed declined, but the labor force participation rate is significantly below its February 2020 level. If the labor force were still at its February 2020 level, the unemployment rate would be 1.7 percentage points higher at 6.3%.
Congress should reject the latest version of the multi-trillion dollar spending packages, which include strong disincentives to working and to investing.
Vaccine mandates and the unconstitutional OSHA rule should be immediately rescinded.
The Federal Reserve should act immediately to rein in inflation.