Employment Situation: Surprise Drop Amid Hurricane Impacts

Bottom Line: Payroll Employment rose by 261k in October, compared with market expectations for an increase of 313k. But there were upward revisions to the prior two months that added 90k to offset the miss. Job creation has averaged 162k over the past 3 months vs. the past 12 months average of 167k. So despite the hurricane-related volatility, the data still shows a very modest slowdown in the pace job creation. Hourly earnings fell slightly after a moderate increase in September. Weekly earnings fell -0.04%. The workweek was unchanged and the 3-month average is now 34.4. The unemployment rate dropped to a record low - but this due to a sharp drop in the labor force as household employment dropped. As we noted last month, the household employment survey looked even more impacted by hurricanes than the non-farm payroll survey and volatility was to be expected. Overall the trend rate of job growth is slowing just slightly as we look through the hurricane-related volatility. Wage growth appears to have slowed modestly in the last 3 months but remains above the pace of 2016 and 2015, and even above the average pace of the last 5-years. Payroll Employment rose by 261k in October, compared with market expectations for an increase of 313k. The prior 2 months were revised, higher in September by 51k and higher in August by 39k. Government jobs ROSE by 9k. Consequently, private sector jobs ROSE by 252k. Overall employment is now 1.4% ABOVE its year ago level, Over the past 12 months, 2,004k jobs have been created. In October, the job gains were in:

• Trade, Transportation & Utilities (+14k with -8k of those in Retail Trade),
• Professional & Business Services (+50k with the addition of 18.3k in Temp Help Services),
• Leisure & Hospitality (+106k),
• Education & Health Services (+34k),
• Manufacturing (+24k),
• Other Services (+12k),
• Construction (+11k), and
• Government (+9k).

Jobs were shed in Information (-1k). The Unemployment Rate FELL by 0.1 percentage points in October to 4.1%, compared with market expectations for a no change to 4.2%. Household employment fell by 484k while the labor force declined by 765k, resulting in a decrease in the number of unemployed of 281k. The Labor Force Participation Rate FELL by 0.4 percentage points to 62.7%. The Employment-Population Ratio FELL by 0.2 percentage points to 60.2%. The number of people Working Part-Time for Economic Reasons FELL by 336k to 4,696k. while Long-Term Unemployment FELL by 112k to 1,621k (accounting for 24.9% of the unemployed), while the Mean Duration of Unemployment FELL by 0.8 weeks to 26.0 weeks. There are now 6.5 million people officially unemployed. In addition, there are another 5,185k people who say they want a job but are not currently looking for one. Finally, another 4,696k people are working part-time because of slack economic conditions. Hourly Earnings were FLAT in October, below market expectations for gains of 0.2%. Hourly earnings are now 2.4% ABOVE their year ago level. Weekly Earnings were also FLAT, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 2.4% ABOVE their year ago level. The Average Workweek was UNCHANGED at 34.4 hours, in line the market consensus at 34.4 hours.