The Employment Situation in October – No Surprise

The labor market report for October showed steady gains in payroll employment, little change in the unemployment rate and a slight acceleration in wage gains. No surprises.

The Bureau of Labor Statistics (BLS) reported payroll employment rose by 161 thousand in October and upward revisions added 44 thousand to estimates for the prior two months. Payroll gains have averaged 176 thousand over the last three months, and 204 thousand since October 2015, a period during which the unemployment rate has largely oscillated between 4.9% and 5.0%. The unemployment rate slipped to 4.9% from 5.0% last month.

Average hourly earnings for all employees on private nonfarm payrolls rose 2.8% since last October, the highest rates since the unemployment rate peaked in 2010. The numbers of workers marginally attached to the labor force and those working part-time for economic reasons were little changed over the year, at 5.9 million and 1.7 million, respectively. Marginally attached workers want and are available for work, have looked for work in the past 12 months, but not in the 4 weeks preceding the survey. Part-time workers for economic reasons would prefer full-time work but have had their hours cut back or could not find full-time work.

A broader measure of underutilization in the labor market that includes these part-time and marginally attached workers declined to 9.5% from 9.7% in September and 9.8% last October. This measure is down substantially from its 17.1% peak, but has declined more slowly in the last year. Assessments of the likelihood of this measure declining further and accelerating wage gains contributing to overall inflation will be influential in deliberations at the Federal Reserve over monetary policy.

This is a solid report, in line with expectations and with no surprises. It may be the “further evidence” that will convince the Fed to raise interest rates at the December meeting (FOMC).

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