Weaker Payrolls Growth Meeting Higher Wages Still Supports December Rate Hike

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Well, there is no real data inside of the payrolls and unemployment report for the conspiracy theorists to run wild with as the last serious economic report ahead of the election. The U.S. Department of Labor released its payrolls and unemployment rate on Friday morning, with nonfarm payrolls rising 161,000 and unemployment coming at 4.9%.

Bloomberg was calling for 178,000 in nonfarm payrolls for October and its Econoday range was 155,000 to 200,000. That was close enough and within the range so it just won’t matter that it was a tad soft. Besides that, ADP had already offered a downward bias to the number. September’s nonfarm payrolls were revised higher to 191,000 from 156,000.

The official unemployment rate of 4.9% for October also met the consensus estimates from Bloomberg and Dow Jones (WSJ) alike. All in all, the key takeaway from this report is that it was not weak enough to thwart expectations for a December rate hike by the Federal Reserve.

Where this report looks more and more like the ADP report is that the private sector payrolls rose by only 142,000 in October. Bloomberg was calling for 170,000 here, and its Econoday range was 140,000 to 200,000. September’s private sector payrolls were revised higher to 188,000 from 167,000.

The workforce participation rate was 62.8% in October, down from 62.9% in September.

Average hourly earnings ticked up 0.4% in October, rather than the 0.3% Bloomberg consensus.  The average workweek stayed flat at 34.4 hours.

One last look, which is far more important than the official unemployment rate, is the U-6 report. That rate fell from 9.7% in September to 9.5% in October. This measures the total number of unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percentage of the civilian labor force plus all persons marginally attached to the labor force.

Here was a sector by sector view of the payroll changes:

  • Health care employment rose by 31,000 in October. Over the past 12 months, health care has added 415,000 jobs.
  • Employment in professional and business services continued to trend up in October (+43,000) and has risen by 542,000 over the year.
  • Employment in financial activities continued on an upward trend (+14,000).
  • Employment in other major industries, including mining, construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, leisure and hospitality, and government, changed little over the month.
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