US jobs growth picks up in October after slowdown
US jobs growth picked up after two straight months of disappointing gains as Covid-related concerns that have kept workers on the sidelines eased.
Employers in the world’s largest economy added 531,000 jobs in October, above the upwardly-revised 312,000 positions created the previous month and closer to the roughly 560,000 monthly average seen since the start of the year.
Economists had expected payrolls to increase by 450,000.
The unemployment rate took another leg lower in October, falling to 4.6 per cent. That is down from 4.8 per cent in September and well below June’s level of 5.9 per cent.
The data, which was released by the Bureau of Labor Statistics on Friday, comes at a critical moment for the labour market recovery, which had lost momentum in recent months.
While the unemployment rate has dropped significantly since June, the pace of job creation had also slowed dramatically since the summer, when the US economy was enjoying robust gains of around 1m new positions each month.
But the alarming spread of the more contagious Delta variant cut short that progress, exacerbating an already acute worker shortage that left a record number of job openings unfilled.
Economists thought ebbing Covid cases nationwide over the past month and an expanded vaccinations campaign would help ease many of the constraints that deterred Americans from returning to the workforce and propel payrolls growth in October.
The latest update on the US employment situation came just days after the Federal Reserve announced it will begin scaling back its $120bn-a-month asset purchase programme later this month, having achieved “substantial further progress” on inflation that averages 2 per cent and maximum employment.
Despite reaching this milestone, Jay Powell, the Fed chair, stressed the US economy has much more ground to make up before more substantive steps to tighten monetary policy should be considered.
When asked about the Fed’s thinking on raising interest rates, Powell repeatedly highlighted that the labour market has not yet healed sufficiently to warrant such a move.
The central bank has said it would keep interest rates at today’s near-zero levels until it achieves maximum employment and inflation that averages 2 per cent over time.
There are still roughly 4m more Americans out of work compared to pre-pandemic levels and the labour force participation rate — which tracks the number of Americans employed or looking for a job — has yet to recover fully.
The participation rate failed to move higher, remaining unchanged from the previous month at 61.6 per cent. In February 2020, it hovered around 63 per cent.
At the press conference following the two-day policy meeting on Wednesday, Powell said “impediments” to labour supply should “diminish” as Covid risks fade further, perhaps leading to more significant increases in jobs again soon.
He added separately that it could be possible for maximum employment to be achieved by the second half of next year should the pace of this year’s gains continue.
Adding urgency to the Fed’s policy discussions is surging inflation, which has proven more persistent and broad-based than anticipated. Wages are also rising, with another boost seen in October.
Average hourly earnings rose 0.4 per cent on a month-over-month basis for a 4.9 per cent annual gain.
According to Powell, today’s inflationary pressures are not due to a “tight labour market”, however, and instead reflect supply-chain bottlenecks and other shortages.