Labor Department Delivers a Goldilocks Unemployment and Payrolls Report for October

Jon C. Ogg

The Federal Reserve did deliver on its expected quarter-point interest rate cut this week. That was a day ahead of a better than expected gross domestic product report for the third quarter and two days ahead of the U.S. Department of Labor’s payrolls and unemployment report.

The latest monthly Bureau of Labor Statistics (BLS) Employment Situation report shows that the unemployment rate ticked a tad higher to 3.6% in October and the number of unemployed persons was 5.9 million. Econoday had an estimate of 3.6%, and the September reading was 3.5%.

Nonfarm payrolls were up by a better than expected 128,000. Econoday’s consensus estimate was just 90,000, and other consensus estimates were down under 80,000 additional payrolls. To make the report even better, the September nonfarm payrolls were revised up to 180,000 from the preliminary report of 136,000.

The real boost came from the private sector adding 131,000 payrolls, and the preliminary September report of 114,000 private sector payrolls was revised to a gain of 167,000. Within the private sector, the drop of 36,000 manufacturing payrolls reflected the General Motors strike.

The average workweek held flat at 34.4 hours, and the monthly gain of just 0.2% in average hourly earnings still translated to wage growth of 3.0% from a year ago.

Also inside the BLS report, those long-term unemployed who have been jobless for 27 weeks or more numbered 1.3 million, and that they accounted for 21.5% of the total unemployed population. The labor force participation rate was 63.3% in October (versus 63.2% a month earlier) and the employment-population ratio held at 61.0%, with both readings off 0.4 percentage point from October of 2018. The number of persons employed part time for economic reasons was about 4.4 million.

Compared with a year ago, the 1.2 million people who were considered marginally attached to the labor force was down by 262,000 from October of 2018. Within this group, the 341,000 who are considered to be discouraged workers was down by 165,000 from a year earlier.

This employment report is not as strong as the gains in payrolls, which had been seen in 2018, but coupled with a GDP report still close to 2.0% from the third quarter, will keep the economy strong enough to avoid an eventual recession for much longer than the media had warned in recent months. This also may support the Federal Reserve’s communication that it would likely take a break from additional interest rate cuts unless the economy and the risks were to deteriorate further.

After the opening bell on Friday, the Dow Jones industrials were up 155 points at 27,200 and the S&P 500 was up 18 points at 3,055, after it hit a new all-time high of 3,056.20. The 10-year Treasury note’s yield ticked up a basis point to 1.70% and those less than 1.5% yields from late in August and the start of September now feel like ancient history. The yield on the 30-year Treasury’s long-bond was up almost two basis points at 2.19%.