This morning’s report from the Bureau of Labor Statistics showed that the economy added 261,000 jobs in October, with significant upward revisions to September. This is certainly welcome news after last month’s disappointing weather-driven top line figure. October’s numbers clearly reflect a bounce back from hurricane-related weakness, as evidenced by the addition of 89,000 food service jobs. Putting this in perspective, the average of September and October is 139,500 jobs a month. Given that this is in excess of what is needed to absorb new and returning labor market entrants, I take this as a sign that we are still on the road to full employment.
The unemployment rate fell slightly to 4.1 percent, but its important to note that this happened for all the wrong reasons—the result of workers leaving the labor force, not finding jobs. The labor force participation rate dropped sharply and the employment-to-population ratio declined as well. If we look at the unemployment rate alone, we are missing the full picture. The prime-age employment-to-population ratio is still far below levels expected in a stronger economy. Furthermore, nominal wage growth continues to lag behind target levels, coming in at 2.4 percent over the year. All told, it’s clear that we are still not at full employment, and the Federal Reserve should keep interest rates low until we are.
Yesterday, President Trump appointed Jerome Powell as Chair of the Federal Reserve. While it would have been wise to keep Janet Yellen, I hope that the incoming chair will continue making data-driven policy decisions. This is all the more important for workers and their families who still have much to gain from a genuine full employment economy. The benefits of a growing economy must be allowed to reach all corners of the labor market, black and Hispanic as well as white, young as well as prime-age, and high-school-educated as well as college-educated.