U.S. Labor Market Extends Gains, Jobless Rate Declines to 6.9%
(Bloomberg) -- The U.S. labor market strengthened in October, defying expectations for more subdued gains amid an intensifying pandemic and lack of additional fiscal relief.
Nonfarm payrolls increased by 638,000 after an upwardly revised 672,000 gain the prior month, according to a Labor Department report Friday. That compared with the 580,000 median estimate of economists surveyed by Bloomberg, and reflected a decline of 147,000 in temporary Census workers.
The unemployment rate fell by 1 percentage point to 6.9% -- a bigger drop than economists projected and double the prior month’s decline -- though the number of long-term jobless Americans surged and now makes up a third of those out of work.
Progress in the U.S. labor market is holding up as household savings help fuel spending and business investment rebounds, putting the economy in better shape than many analysts expected just six months ago. The improvement, though, may have come too late to help President Donald Trump, who’s on the verge of losing to Democrat Joe Biden in this week’s election.
In addition, jobs remain 10 million below pre-pandemic levels, and with coronavirus infections rising at a record rate this week, maintaining the pace of hiring may be difficult.
Other figures point to an increasingly fragile labor market beneath the headline numbers. The number of long-term unemployed -- those jobless for 27 weeks or more -- increased by 1.15 million to 3.56 million, the highest level since early 2014.
Colder weather will also challenge businesses like restaurants that have depended on outdoor dining when many Americans are fearful of gathering indoors, making the economy’s path highly dependent on the development and distribution of a successful vaccine, especially if virus restrictions re-emerge as they have in other parts of the world.
In addition, the congressional election results this week probably reduced the chances that any new stimulus will be as massive as Democrats sought, meaning limited cash for the unemployed and businesses most affected by the virus.
“It’s hard to look at months or weeks past because you know what’s lying ahead and that’s an increase in virus cases. That continues to be the dark cloud looming ahead,” said Jennifer Lee, senior economist at BMO Capital Markets. “But the fact that the jobless rate took such a big decline, that’s extremely encouraging.”
U.S. stocks fell at the open, while 10-year Treasury yields rose. The dollar fell to the lowest in more than two years.
What Bloomberg’s Economists Say...
“October payrolls bent the trend of deceleration in the labor-market recovery, showing encouraging signs of improvement across a wide range of headline metrics. ... Yet a look beneath the surface continued to highlight significant bifurcation in the recovery across different sectors and employment groups.”
-- Yelena Shulyatyeva, Andrew Husby and Eliza Winger, economists
For the full note, click here
Federal Reserve Chair Jerome Powell said Thursday that “we’re sort of halfway there on the labor market recovery, at best,” while also signaling concern over the surge in Covid-19 cases.
Other highlights of the report:
- Private-sector payroll gains accelerated during the month with a 906,000 gain following 892,000. Hiring picked up in retail, transportation and warehousing, professional and business services, and construction.
- The number of permanent job losers was little changed at 3.7 million in the month, a positive sign after two straight significant increases.
- The female unemployment rate, at 6.7%, is now below that of men, at 7%. Women were less likely to be unemployed than men before the pandemic, but that had reversed during the crisis.
- The labor-force participation rate rose to 61.7%, erasing the prior month’s decline, while the employment-population ratio increased to 57.4%, the highest since March.
- Prime-age women’s labor-force participation -- reflecting people ages 25 to 54 -- rose for the first time in four months.
- Unemployment among Black Americans dropped by 1.3 percentage point to 10.8% while for White Americans it fell to 6%. The Latino unemployment rate fell to 8.8% from 10.3%.
“The economy still looks in place even though the virus and election fears have caused more anxiety,” said Stan Shipley, an economist with Evercore ISI.
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