Economy Adds a Surprising 271,000 Jobs
Washington — An unexpected surge of hiring last month accompanied by strong wage gains suggests that the U.S. labor market remains solid and increases the likelihood that the Federal Reserve will make its first interest rate increase in nearly a decade next month.
The Bureau of Labor Statistics said Friday that employers across a broad spectrum of industries added a net 271,000 new jobs in October. That is far more than most analysts’ forecast of about 180,000 jobs, and a sharp acceleration from revised payroll gains of 137,000 in September and 153,000 in August.
The nation’s unemployment rate inched down to 5 percent from 5.1 percent in September — with the labor force expanding, not shrinking as in some recent months. The latest jobless figure is the lowest since April 2008 and exactly half the rate at its peak from the Great Recession in October 2009.
“It was a blowout report,” said Michelle Meyer, an economist at Bank of America Merrill Lynch. “That’s not a trend we’re expecting to continue,” she added, “but looking ahead, there’s still momentum in the labor market, which is encouraging.”
Analysts also were heartened by what has been a long elusive pick-up in workers’ pay.
In October, average hourly earnings rose a solid 9 cents from the prior month for a year-over-year gain of 2.5 percent, which is the highest since July 2009. Throughout the recovery, wage gains have been running just a bit above or below 2 percent, but the latest uptick may signal that employers are finding they need to raise pay more in an increasingly tight labor market.
Sophia Koropeckyj, a labor economist at Moody’s Analytics, noted that wage growth was especially steep in construction, business services and health care — industries that have struggled with worker shortages.
Still, reports of skill mismatches and stagnant levels of people leaving jobs voluntarily for higher pay elsewhere indicate that there are restraints in wage growth.
Last month, employment in manufacturing and the mining industry was essentially flat, reflecting the strong dollar, weakness abroad and low oil prices. But business and professional services, retail, health care, leisure, as well as construction, all bulked up their payrolls.
The strong overall hiring suggests that the late-summer slowdown was a bump in the road rather than a downshift in growth as the economy heads into the important holiday shopping season.
Consumers have been driving economic growth in the U.S., thanks to steady job gains, low debts helped by rock-bottom interest rates and relatively resilient housing and stock markets.
New cars have been flying off dealer lots. And economists are looking to consumers to keep fueling the economy, now in its seventh year of growth after the last downturn.
“We’ve had a major upward movement in consumer spending,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “Domestic demand is now offsetting turbulence from abroad that it didn’t in the past.”
Friday’s report will certainly boost the Fed’s confidence that the job market is continuing to progress – a precondition for the central bank to start lifting its benchmark short-term interest rate, which has been held near zero since late 2008.
Fed Chair Janet Yellen said Wednesday that the economy is “performing well” and that a rate hike could come next month, but policymakers are closely monitoring conditions affecting the outlook for inflation and the labor market. Fed officials have been more concerned recently about the very low inflation, but another month of good wage gains could reassure policymakers on this front as well.
The Fed will see one more major jobs report early next month before officials assemble Dec. 15-16 for their last scheduled monetary policy meeting of the year.