This morning’s report from the Bureau of Labor Statistics (BLS) showed that the economy added 250,000 jobs in October. (The BLS reports that Hurricane Michael had no discernible October’s jobs numbers.) Average payroll employment growth over the last three months is now 218,000, in excess of what is needed to absorb new and returning labor market entrants. The unemployment rate held steady at 3.7 percent alongside modest improvement in labor force participation rate and the employment-to-population ratio, each increasing 0.2 percentage points. Narrowing analysis to the prime-age population, 25 to 54 years old, we see even more significant gains. The prime-age labor force participation rate rose 0.5 percentage points while the employment-to-population ratio rose 0.4 percentage points. Workers are continuing to return to the labor market and many of them are getting jobs. There’s still work to be done to reach full employment, but this paints a very promising picture for the economy moving forward. After driving the car with the brakes on for the several years prior to the current administration, policymakers have finally increased government spending. Expansionary fiscal policy, particularly spending, works to boost the economy.
Furthermore, nominal wage growth continues to show promise, increasing 3.1 percent over the year. This is the first time we’ve hit at least 3 percent wage growth since April 2009. This is definitely a strong signal that workers are finally beginning to see an improving economy reach their paychecks. However, until nominal wages are rising by at least 3.5 percent—and for a sustained period—there is no threat that price inflation will begin to significantly exceed the Federal Reserve’s 2 percent inflation target and the Fed should act accordingly by letting the economy continue to strengthen. While today’s numbers are a significant improvement, it will take stronger and sustained wage growth for workers to begin to reap the benefits of economic growth—and to achieve a genuine recovery from the Great Recession.
This is all the more important for workers and their families who still have much to gain from a genuine full employment economy. Yesterday’s Latina Equal Pay Day highlighted just how different outcomes are in the economy for different people. 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.