The labor market rebounded in October from unexpected weakness in August and September but are the signals of recent months indicating strength, weakness or volatility?
The Bureau of Labor Statistics (BLS) reported payroll employment expanded by 271 thousand in October, a solid recovery from the 145 thousand average in August and September. Revisions added 12 thousand to earlier estimates for the prior two months. The unemployment rate slipped to 5.0% from 5.1% in September.
On the surface the numbers for October look good but there’s reason to worry. October’s payroll gains are strong compared to August and September, and are the best in 2015 so far. But the average gain for the first ten months of the year, 206 thousand, is lower than the corresponding period in 2014, 236 thousand. And add a digit and the decline in the unemployment rate is less than it appears, falling from 5.1% (5.05%) to 5.0% (5.04%), rounding error. The encouraging 313 thousand gain in the labor force only partially reverses the 350 thousand decline last month. The labor force participation rate was 62.4% in October, 50 basis points lower than the 2014 average of 62.9%.
So the October numbers are not as good as they look, and it’s not clear whether they’re indicating strength, weakness or just volatility. What is clear is that the rebound from September doesn’t make the Federal Reserve’s December decision whether or not to raise interest rates a slam dunk (FOMC). Uncertainty abounds in this report. There’s plenty of devils in the details.