Labor department figures beat analysts’ expectations but show steep drops in manufacturing sector and slower hiring this year
US employers added a solid 128,000 jobs in October, a figure that was held down by a now-settled strike against General Motors that caused several thousand workers to be temporarily counted as unemployed.
The labor department says the unemployment rate ticked up from 3.5% to 3.6%, still near a five-decade low. For the second straight month, average hourly wages rose 3% from a year ago.
The better-than-expected figures, together with upward revisions from two previous months, suggests a jobs market that could give consumers confidence to keep spending despite weak business investment, slowing economies in Europe and China, and international trade tensions.
The latest numbers appear to validates the opinion of US central bankers that the jobs market is “strong” and reinforces the Federal Reserve’s hint that it will pause rate cuts after its third quarter-point reduction this month.
“The jobs data was distorted by the General Motors strike, one of the biggest this century, but the number of jobs created was quite a bit higher than expected,” Neil Birrell, chief investment officer at fund manager Premier Asset Management.
“This appears to back up the Fed’s comments on Wednesday night about the economy being in decent shape and its shift in policy stance. This is more good news for equities and the dollar, but we may see bond yields higher.”
The GM strike, which ended last week, contributed to the loss of 41,600 auto factory jobs in October. But the settlement will likely lead to a rebound in the coming months.
The report revised upward job gains in the prior two months by a combined 95,000, suggesting a healthier job market than initially believed.
James Ingram, investment manager at stockbroker MB Capital, said the figures were “somewhat stronger than our estimates and suggests the underlying economy remains resilient to trade disputes and the pace of job growth remains good”.
Still, hiring has slowed this year. Employers have added an average 167,000 jobs to payrolls each month this year, a slowdown from the 223,000 jobs added each month, on average, last year.
But within the broadly positive reception voices of caution could be heard.
“Today’s numbers beat expectations, but the job market has cooled significantly since last month, as slowing global growth and trade war concerns continue to fester,” warned Richard Flynn, UK managing director at Charles Schwab.
Most of the job gains were in leisure and hospitality, education and health services and professional and business services. Construction and finance also posted increases. Even jobs in retail rose, a sector that has recorded loses for seven straight months.
But despite low unemployment rates, wage growth has largely stalled with average hourly earnings for private sector workers increasing 6 cents in $28.18 an hour.
Since peaking at a 3.4% increase in February, pay increases have eased somewhat. That suggests while businesses have job openings, businesses are not prepared to increase wages sufficiently to steal workers away from competitors.