Non-farm payrolls rebounded 261k positions in October, after hurricane-related disruptions held back job growth to a meagre 18k in September (that figure was revised up from an earlier-reported 33k loss). Still, the unemployment rate ticked even lower to 4.1%.
Given the disruptions from the hurricanes, the details of the payrolls report must be taken with a grain of salt. Employment in food services and drinking places increased sharply (+89k) over the month, mostly offsetting a decline in September that reflected the impact of the hurricanes. Business services (+50k) and education and health sector (+41k) hiring continue to be solid. On the goods side, employment also accelerated to 33k new jobs, on healthy hiring in manufacturing (+24k).
On the household side, the decline in unemployment rate is less positive given it was driven by a sizeable drop in the labor force (-765k). The participation rate declined to 62.7%, and has shown little movement over the past 12 months. The employment to population ratio also fell to 60.2%, but is still 0.5%-points higher than a year ago.
Average hourly earnings were unchanged in October, taking the year-on-year pace to a modest 2.4%.
Key Implications
Given September’s hurricane-related payroll disappointment, the bar was set high for October, and on the surface September fell short. However, revisions over the past two months totaled 90k jobs, should vanquish any disappointment.
Today’s sold rebound combined with the strong economic momentum in the third quarter, certainly argues for a rate hike by the FOMC in December. However, we still have yet to see a notable pick-up in core inflation and now wage growth has disappointed. We expect that Yellen will still be comfortable taking rates another 25 bps higher in what will likely be her second last meeting as Chair
