US job growth is rising in October with ‘widespread’ progress

U.S. job growth rose after two months in a row with slower progress as pandemic-related concerns that have kept workers on the sidelines eased, leading to “widespread” gains, particularly in the leisure and hospitality sectors.

Employers in the world’s largest economy added 531,000 jobs in October, up from the revised 312,000 jobs created the previous month and closer to the around 580,000 monthly average seen since the beginning of the year. Economists had expected the wage bill to rise by 450,000.

Unemployment took another leg lower in October, falling to 4.6 per cent. That is a drop from 4.8 percent in September and well below the June level of 5.9 percent.

According to the Bureau of Labor Statistics, which released the data on Friday, job growth was “widespread” with “remarkable” progress across a number of sectors.

Leisure and hospitality jobs rose by 164,000 in October, mainly driven by an increase in employment for food and beverage outlets. This is the highest amount since July, but still 1.4 million. from the level before the pandemic.

Professional and business services added 100,000 jobs, and manufacturing jobs increased by 60,000, while employment in retailers increased by 35,000.

The private sector was driving October’s progress, with state and local government payrolls “weak” for the month, according to Thomas Simons, an economist at Jefferies. He cited “seasonal deviation” when schools reopened.

Employment fell in municipal and state education and state education by 65,000.

The data comes at a critical time for the recovery in the labor market, which had lost some of its former momentum in recent months.

While unemployment has fallen significantly since June, the pace of job creation has also fallen dramatically since the summer, when the U.S. economy saw robust growth of about 1 million new jobs each month.

However, the alarming spread of the more contagious Delta variant of Covid-19 interrupted this progress and exacerbated an already acute shortage of workers, leaving a record number of job vacancies.

Prior to this month’s revision, job growth for September had only been 194,000, which was far below expectations at the time and a steep decline from previous periods.

Economists pointed to declining Covid cases nationwide over the past month and an expanded vaccination campaign as factors that help ease many of the constraints that have deterred Americans from returning to the workforce, ultimately accelerating wage increases in October.

Line chart of non-agricultural wage shortages since early 2020 (m) showing how the US job recovery regained momentum in October

The latest update on the U.S. employment situation came days after the Federal Reserve announced it would begin scaling down its $ 120 billion asset buyback program. USD per month later in the month, after achieving “significant further progress” towards maximum employment and inflation, which averages 2%.

Despite reaching this milestone, Fed Chairman Jay Powell stressed that the U.S. economy had much more ground to catch up on before more significant steps to tighten monetary policy were to be considered.

When asked about the Fed’s thoughts on raising interest rates, Powell repeatedly emphasized that the labor market had not yet healed sufficiently to justify such a move.

The central bank has said it will keep interest rates at today’s near zero level until it achieves maximum employment and inflation, which averages 2 percent over time.

There are still about 4 million more Americans without work compared to pre-pandemic levels, and the labor force participation rate – which tracks the number of Americans who are employed or looking for work – has not yet fully recovered.

The employment rate failed to fluctuate from the previous month to 61.6 per cent. In February 2020, it hovered around 63 per cent.

At the press conference following the two-day political meeting on Wednesday, Powell said “barriers” to labor supply should “lessen” as Covid risks disappear further, which may lead to more significant increases in jobs again soon.

He added separately that it could be possible to achieve maximum employment in the second half of next year if the pace of this year’s progress continues.

The Fed’s political discussions are putting pressure on, and rising inflation has proven to be more persistent and broad-based than expected. Wages are also rising, with another boost seen in October.

The average hourly wage rose 0.4 percent on a month-on-month basis to an annual gain of 4.9 percent.

According to Powell, however, the current inflationary pressures were not due to a “tight labor market”, but instead reflected bottlenecks in the supply chain and other shortcomings.

Short-term US government bonds were sold according to the latest job figures, where the yield on the two-year government bond rose by 0.02 percentage points to 0.44 percent. The leading 10-year bond yield was slightly changed by 1.52 per cent.

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