Hiring rebounded sharply in October, as U.S. non-farm payrolls added 250k new jobs. That comes off a modest 118k gain in September, which was held back by the impact of Hurricane Florence.
The unemployment rate held at its cycle low of 3.7%. The overall labor force participation rate actually moved up two ticks to 62.9%, but has remained broadly unchanged over the past year.
Turning to the industry detail, both goods and services sector hiring accelerated in October. Within services, strength was seen in health care (+36k), transportation and warehousing (+25k), and professional and business services (+35k). Hiring in leisure and hospitality (+42k) also bounced back in October after being held back Hurricane Florence ins September.
Meanwhile, strength in the goods-producing sector came in both manufacturing (+32k) and construction (+30k).
The closely watched measure of wage growth – average hourly earnings – rose 0.2% on the month. On a year-on-year basis, wages were up 3.2% – a new post-recession high.
Key Implications
This is an unambiguously positive report. Hiring bounced back from a hurricane-dampened September. The number of Americans with jobs relative to the population reached a new post-recession high. And, perhaps most notably, wages continue to make progress.
There is little doubt that the full employment half of the Fed’s dual mandate is right on track. The October employment report is consistent with another rate hike in December.
It has long been the inflation side of the scale that has caused head scratching among FOMC members. Inflation is on target now, and the question is how much pressure is bubbling beneath the surface. So far there isn’t a ton of evidence for a breakout in price pressures. That underpins our expectation that the Fed can continue its gradual pace of a hike a quarter over the next year.
