Employment Situation: Sharp Rebound as Solid Growth Continues

November 2, 2018
Bottom Line: October saw a sharp rebound in job creation as the economy added 250k jobs, 50k more than expected. Gains were distributed broadly across industries with private service producing jobs rebounding particularly sharply after unusually low gains in September. Average hourly earnings were in-line with expectations and revised a touch lower in prior months -- but we are still seeing a very modest acceleration with 3-month annualized gains of 3.4% vs. 3.1% over the last 12 months and 2.6% in 2017. Additionally, average weekly earnings are starting to confirm the hourly earnings acceleration. Finally, the household jobs survey showed strong gains of 600k, holding the unemployment rate at 3.7% with the labor-force participation increasing. Overall, this was a solid report after last month's hurricane-impacted weakness and leaves the labor market at a trend job growth rate of 210-220k, remarkably strong this late in a cycle, with wage gains accelerating modestly. Payroll Employment rose by 250k in October, compared with market expectations for an increase of 200k. The prior 2 months were revised, lower in September by 16k and higher in August by 16k. Government jobs ROSE by 4k. Consequently, private sector jobs ROSE by 246k. Overall employment is now 1.7% ABOVE its year ago level, Over the past 12 months, 2,516k jobs have been created. In October, the job gains were in:
  • Trade, Transportation & Utilities (+35k with 2k of those in Retail Trade),
  • Professional & Business Services (+35k with the addition of 3.3k in Temp Help Services),
  • Education & Health Services (+47k),
  • Leisure & Hospitality (+42k),
  • Manufacturing (+32k),
  • Construction (+30k),
  • and Information (+7k).
The Unemployment Rate was UNCHANGED at 3.7%, compared with market expectations for a no change to 3.7%. Household employment rose by 600k while the labor force increased by 711k, resulting in an increase in the number of unemployed of 111k. The Labor Force Participation Rate ROSE by 0.2 percentage points to 62.9%. The Employment-Population Ratio ROSE by 0.2 percentage points to 60.6%. The number of people Working Part-Time for Economic Reasons FELL by 24k to 4,523k. while Long-Term Unemployment FELL by 11k to 1,373k (accounting for 22.6% of the unemployed), while the Mean Duration of Unemployment FELL by 1.5 weeks to 22.5 weeks. There are now 6.1 million people officially unemployed. In addition, there are another 5,309k people who say they want a job but are not currently looking for one. Finally, another 4,523k people are working part-time because of slack economic conditions. Hourly Earnings ROSE by 0.2% in October, below market expectations of 0.2%. Hourly earnings are now 3.1% ABOVE their year ago level. Weekly Earnings also ROSE by 0.5%, the result of the change in hourly earnings and a longer workweek. Weekly earnings are now 3.4% ABOVE their year ago level. The Average Workweek ROSE by 0.1 to 34.5 hours, in line the market consensus at 34.5 hours.