October Jobs Report: Economy added 638000 Jobs As Unemployment Rate Fell to 6.9%

morgan stanley

The Labor Department’s October jobs report offered fresh signs of a slowing economic recovery in the U.S., with the number of jobs added back and the pace of improvement in the unemployment rate each decelerating considerably from earlier this year. Still, the increase in non-farm payrolls and change in the unemployment rate were each better than economists feared for the month.

The Department of Labor released its monthly non-farm payrolls report Friday at 8:30 a.m. ET. Here were the main results from the report, compared to consensus estimates compiled by Bloomberg:

Non-farm payrolls: 638,000 vs. +580,000 expected and a revised +672,000 in September

Unemployment rate: 6.9% vs. 7.6% expected and 7.9% in September

Average hourly earnings, month-over-month: 0.1% vs. 0.2% expected and 0.1% in September

Average hourly earning, year-over-year: 4.5% vs. 4.5% expected and a revised 4.6% in September

Friday’s jobs report also saw revisions to the last couple months’ worth of payrolls. August employment was upwardly revised to see a gain of 4,000 jobs to 1.493 million, and the change for September was revised up by 11,000 to 672,000.

U.S. employers have brought back fewer jobs in every month since June, when payrolls rose by a record 4.78 million as stay-in-place orders and lockdowns lifted and allowed many businesses to restart operations. That trend was expected to have continued in October, as the economy only slowly brought back payrolls that had been lost at the start of the pandemic.

Employment is still down by more than 10 million payrolls since the start of the pandemic, since net job increases in each of the past five months have still not compensated for the historic declines in each of March and April. And 21.5 million Americans are still receiving some form of unemployment insurance, according to the Labor Department’s latest weekly jobless claims report, for a sum that has improved from a pandemic-era peak of more than 30 million, but held multiples above the total from the same time last year.

The October jobs report was also expected to extend a worrying trend seen in the past several months’ worth of data: A growing number of individuals’ temporary furloughs or layoffs have become permanent. The number of so-called permanent job losers increased by 345,000 to 3.8 million in September, for a sum of 2.5 million above the level from February. And the number of long-term unemployed Americans, or those jobless for 27 weeks or more, jumped by 781,000 to 2.4 million last month.

Still, the overall unemployment rate was expected to tick lower again in October for the sixth straight month of improvements. Last month, however, the step lower in the jobless rate came alongside a shrinkage in the overall size of the civilian workforce, indicating that more Americans were discouraged and stopped looking for a job. The size of the overall civilian workforce shrank by nearly 700,000 workers in September after growing in August.

The release of the October jobs report comes as coronavirus case counts worsen in the U.S. The country topped 100,000 new infections in a single day for the first time ever on Wednesday, according to data cited by the Washington Post. The latest resurgence in virus cases likely began too late in October to have generated a meaningful impact on the jobs report due out Friday, given that the survey week for the report takes place around the 12th of each month. However, the outbreak presents concerns for the labor market going forward.

“The risk of renewed shutdowns on the heels of COVID case increases is real and could make for very messy jobs numbers in coming months,” RBC Capital Markets economists said in a note Oct. 30.

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