The Bureau of Labor Statistics (BLS) released the Employment Situation report for October today describing October’s net addition of 80 thousand to payroll employment as trending up. The decline in the unemployment rate to 9.0 percent from 9.1 was characterized as little changed.
I agree with the unemployment rate call because the increase of 277 thousand in the number of employed persons and the lesser 181 thousand increase in the civilian labor force, pushing the rate down, are both below the 400 thousand threshold needed for a statistically significant change in the household survey.
But payrolls trending up is a tougher call. The revisions to the August number were unusually large and unusually lopsided, moving the initial estimate from 0 to 104 thousand. The upward first revision to September was on the high side (+55 thousand) and may be reduced with the November revision given that the first and second revisions have tended to be offsetting so far this year. If that’s true, and with today’s October estimate, payroll employment has been trending nowhere, basically flat for the last four months, and arguably trending down since the beginning of the year. And there seems to be little evidence that the government sector is going to stop shedding jobs anytime soon. This picture is a little less optimistic than the monthly average increase of 125 thousand over the last 12 months.
Focusing on the big picture, gains in employment need to outpace growth in the labor force to bring the unemployment rate down. The labor force is growing again after slowing dramatically and contracting through the recession, but the subpar pace of job creation reflected in today’s report suggests the unemployment rate could go higher before moving down substantially.