The Bureau of Labor Statistics (BLS) reports that the U.S. economy added just 128,000 jobs in October. That number was held down, however, by an estimated 46,000 striking workers who were part of the now-resolved GM strike and are back on the job. The October jobs number was also held down by the loss of 20,000 temporary workers hired in preparation for the decennial census. Accounting for these two factors to provide a better sense of underlying trends, jobs grew by 194,000 in October. Even this number may be a slight undercount, because though it accounts for the direct effect of the strike, it does not include any supply chain ripple effects. Next month’s release will provide a clearer picture. Accounting for direct effect of striking workers and temporary Census workers, jobs grew 189,000 on average over the last three months.
This chart provides average monthly job growth in recent years, accounting for striking workers, temporary Census workers, and the preliminary benchmark revisions, which were released in August and affect the 2018 and early 2019 numbers. Considering these factors, average monthly job growth so far in 2019 is 158,000—a slowdown from the 2018 rate of 192,000 per month. However, given that we currently need less than 100,000 jobs per month to break even, (i.e. to keep the unemployment rate from rising as the working-age population grows,) this level of jobs growth is firmly in expansionary territory and, if sustained, will continue to nudge the unemployment rate down. There can be volatility in the unemployment rate month-to-month however, and that is what we saw in October, with the unemployment rate ticking up to 3.6%. The increase, however, was for “good reasons”—people being pulled into the labor market—as the labor force participation rate ticked up one tenth of a percentage point. Note that the GM strike should not have affected the unemployment rate, since BLS treats striking workers as “employed not at work” in the household survey.
One thing worth noting in today’s report is the ongoing weakness in retail. In October, retail grew by 6,100, but remains more than 150,000 jobs below its peak in early 2017. How did seasonal hires affect today’s numbers? In recent years, retailers have added 100,000 seasonal jobs or more in October as they begin to ramp up for the holidays. BLS’s seasonally adjusted numbers account for seasonal hiring, but if there were fewer seasonal hires than expected, that would reduce the number of jobs reported.
Nominal wages grew 3.0% year-over-year in October, which is slower than expected in an economy where the unemployment rate has been at or below 4.0% for the past 20 months. This chart shows that wage growth—which was picking up from late 2017 to late 2018—has been backsliding this year. Today’s jobs report strongly suggests the Federal Reserve has done the right thing by lowering interest rates to help ensure that the recovery, which began more than 10 years ago, is sustained, rather than dying out before many low- and middle-income households get a chance to really feel its benefits.