- Non-farm payrolls rose by a healthy 128k in October, higher than consensus expectations. Adding to the positive headline, the prior two months were revised up by 95k jobs. The unemployment rate ticked up modestly to 3.6%.
- The headline tally would have been even stronger were it not for the strike at GM, which held back the manufacturing sector (-36k jobs). The BLS noted that within manufacturing jobs in motor vehicle and parts were down 42k, reflecting strike activity.
- Private services sector hiring held up (+157k) supported by gains in food services and drinking places (+48k), social services (+20k) and financial activities (+16k). Government employment had recently been boosted by census worker hiring, but federal government hiring partially reversed in October (-17k), as temporary Census workers completed their work.
- The slight rise in the unemployment rate was driven by a positive trend in the labor force participation rate, which now sits at 63.3%, up 0.4 percentage points over the past year.
- Average hourly earnings rose 0.2% in September, and are up a decent 3% on a year-on-year basis.
Key Implications
- There is a lot to like about this job report. Even though the trend in the monthly jobs tally is cooling, it has held up better than we had expected, driven by a continued expansion in the share of Americans in the job market. Drilling down to core-aged population (25-54 yrs), the employment-to-population ratio is now 80.3%, the highest it has been since 2001, suggesting the benefits of economic growth are spreading to a greater share of adults. This is a positive trend for consumers, and for extending the economic cycle.
- Looking at the resilience of the labor market, the FOMC should be comfortable with sitting on the sidelines after cutting rates three times this year. As long as international risks do not intensify and hurt confidence domestically, the U.S. economy is expected to remain in expansion, supported by the health of the consumer.
