Employers Add 214,000 Jobs in October
The Labor Department reported that the unemployment rate fell to 5.8 and the rate of participation in the labor market rose to 62.8 percent.
In this Oct. 28, 2014 photo, Shantel Howard, 29, of Miami, right, makes an appointment for a job interview with Calvin Klein employee Melina Mikhalices, left, after submitting her resume during a job fair at Dolphin Mall, in Miami.
Monthly job growth came in a bit lower than expected in October, though the jobless rate fell and more Americans rejoined the workforce.
Businesses added 214,000 jobs last month, down from 256,000 in September, which was greater than originally reported, figures from the Labor Department Friday showed. The unemployment rate fell to 5.8 from 5.9 percent. Bloomberg-surveyed economists had called for a payroll gain of 235,000 and an unchanged unemployment rate.
The U.S. labor market continues to firm despite weakness abroad, from Europe to China. Healthy, broad-based job gains are the engine that drives momentum in the recovery. And employment underpins confidence in the consumer, whose spending makes up the biggest part of the economy.
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“More and more sectors are coming along and supporting this expansion. That's to some degree exactly what the doctor ordered,” says Torsten Slok, chief international economist at Deutsche Bank. “We want the U.S. economy to grow organically because then once it does that, we can start to take it off the life support that the Federal Reserve has been providing now for almost six years.”
That life support refers to the near-zero interest rates the Fed has maintained since 2008, an effort to jolt life into the economy through easy lending. The Federal Open Market Committee said after its October policy meeting that it’s keeping the rates low for a “considerable time,” but acknowledged that labor market slack is decreasing.
Against the backdrop of better-than-expected job growth this year, the one head-scratching piece of the recovery still missing is wage growth, which has just barely kept pace with the cost of living. The jobs report showed that the average hourly earnings rose 3 cents to $24.57 in October and have risen 2 percent over the past year.
But there are already signs that wages are starting to edge up. The Labor Department reported last week that the employment cost index, which measures the cost of labor and tends to move up and down with wages, grew 0.7 percent in the third quarter.
That could mean employers will begin finding workers harder to come by and more expensive to hire.
Stihl, Inc., a Virginia Beach firm that manufactures chain saws and power tools, didn’t itself suffer big job cuts during the recession. But as the economy improves and other companies recover, Stihl has had to respond accordingly to stay competitive, says Andy Garstenauer, the company’s director of manufacturing engineering.
“It’s of course becoming more competitive to find skilled employees,” he says. “We need to look a little bit harder and we also need to act faster. If we find a suitable employee, we cannot wait too long because another company might put a counter offer in. And of course our offers have to be very competitive.”
The latest employment report also suggests a continued ironing out of labor market slack, which refers to portions of the workforce that aren’t being used to their full potential. For one, the labor force participation rate, which measures the percentage of Americans working or actively looking for a job, edged up to 62.8 percent in October from 62.7 percent in September.
The number of people working part-time for economic reasons – because their hours had been cut or because they couldn’t find full-time work – was essentially unchanged at 7 million in October.
Accounting for almost one-third of the total unemployed population, those without work for six months or more totaled 2.9 million in October. Over that past year, that share of the jobless sector has fallen by 1.1 million.
The length of the average workweek last month edged up by 6 minutes to 34.6 hours.
Other recent employment data also suggest improved conditions. The average number of Americans applying for jobless benefits continues to hover around a 14-year low, the Labor Department reported this week. And less firing is considered a positive for later hiring.
Besides employment gains, Americans are also feeling some relief at the gas pump. AAA reported this week that the average price of one gallon of regular gasoline fell below $3 for the first time in four years. Heading into the shopping-filled holiday season, this could be a boost most for Americans whose budgets are already stretched.
“It is not going to impact every household evenly. [For] more affluent households, probably the extra $10 at the fill-up isn’t going to make much of a difference,” says Jack Kleinhenz, chief economist at the National Retail Federation. “But probably those who are median- or lower- income will find an extra few extra dollars in their wallet and that should be available for individuals to spend.”
This would be a good sign for consumer spending behavior, which Slok describes as “cautious” during the recovery. But he expects the rosier labor market will continue to encourage a “gradual thawing” of their uneasiness.
“Now we have seen these huge gains in the stock market … and in home prices and on top of that, we are also seeing people getting jobs. Why are consumers not, then, accelerating spending more?” Slok says. “We do expect consumers to continue to spend and do well, but we expect this to move forward at a very slow pace. That being said, the number one driver of consumption is employment, whether you have a job or not.”
