The rise in the index of aggregate hours since July is equivalent to adding 498,000 private sector jobs a month
The economy added 531,000 jobs in October, as the unemployment rate fell to 4.6 percent, a level not reached following the Great Recession until February 2017. The jobs numbers for the prior two months were also revised upward by 235,000 to bring the three-month average to 442,000.
It’s also worth noting that private sector employment grew even more rapidly, adding 604,000 jobs. The hours-worked index, which only measures private sector employment, has risen by 1.2 percent in the last three months, which would translate into 498,000 private sector jobs per month if there were no change in hours. Many employers who are unable to hire are likely increasing the hours for the workforce they have.
Unemployment Falls for Most Groups
The drop in the unemployment rate was much larger than most analysts had expected, especially after a 0.4 percentage point decline in September. It has fallen by 1.3 percentage points since June. The least educated saw the largest drop in unemployment with the rate falling by 0.5 percentage points for those without a high school degree to 7.4 percent, and 0.4 percentage points for those with just a high school degree to 5.4 percent. The unemployment rate for college grads edged down 0.1 percentage points to 2.4 percent, which is 0.3 percentage points above its pre-pandemic average.
The unemployment rate for Blacks and Asian Americans was unchanged at 7.9 percent and 4.2 percent, respectively. It fell 0.4 percentage points to 5.9 percent for Hispanics.
Wage Growth Remains Strong
We continue to see strong wage growth, especially for low-paid workers. The average hourly wage for production and nonsupervisory workers has risen 5.8 percent year-over-year. In the low-paid leisure and hospitality sector, it has risen 12.4 percent. However, wage growth is slowing somewhat in the leisure and hospitality sector. The annual rate for the last three months (August, September, October) compared with the prior three months (May, June, July) was 9.7 percent; although it accelerated slightly for production workers overall to 6.6 percent.
Manufacturing and Construction Have Strong Growth, Again
The manufacturing sector added 60,000 jobs, following a gain of 31,000 in September. Construction added 44,000 jobs after adding 30,000 in September. The sectors are now down 2.1 percent and 2.0 percent, respectively, from their pre-pandemic levels. This compares to a falloff of 2.5 percent for the private sector as a whole. That reverses the normal pattern where these sectors are hit hardest in a recession.
Strong Job Growth in Hard-Hit Service Industries
Most of the hardest hit industries showed good job growth in October. Air transportation added 9,200 jobs, but is still down 9.7 percent from its pre-pandemic level. The motion picture industry added 11,300 jobs and is now down 20.9 percent. The temp sector added 41,100, while arts and entertainment added 20,900 jobs. They are now down 5.9 percent and 11.4 percent, respectively, from pre-pandemic levels. Hotels added 23,200 jobs, while restaurants added 119,400, leaving them 14.9 percent and 6.4 percent lower than their pre-pandemic levels, respectively.
Nursing homes added 11,800 jobs, but employment is still 14.2 percent below pre-pandemic levels. Child care facilities added just 700 jobs in October, leaving employment 10.1 percent below pre-pandemic levels. This presumably corresponds to a roughly 10 percent drop in child slots, which means many parents of young children face even greater than normal difficulties finding care if they want to work.
State and Local Education Shed 65,000 Jobs
This sector continues to lose jobs even with children back in school pretty much everywhere. This could reflect difficulty in hiring, as governments often can’t raise wages as rapidly as in the private sector. Employment in the sectors are now down 7.9 percent and 4.6 percent, respectively, from pre-pandemic levels.
The Number of Unincorporated Self-Employed Edged up by 24,000
The October figure is 643,000 (7.3 percent) above the 2019 average. This presumably reflects people taking advantage of the pandemic to change career paths.
Share of Long-Term Unemployed Falls
The share of long-term unemployed (more than 26 weeks) fell sharply in September to 31.6 percent. However, it is still well above normal levels, which would be under 20 percent.
October Report is Solidly Positive
There is much to like in this report. The overall picture in both surveys is overwhelmingly positive. If we can keep up this pace of growth we will get back the jobs lost in the pandemic by next summer. The unemployment rate is already below many economists’ estimates of Non-Accelerating Inflation Rate of Unemployment (NAIRU). And workers have more freedom to change jobs than at any point in the last half century.
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