Marching to its now-familiar steady drumbeat of job growth, the United States saw its unemployment rate tick down to 5.8 percent in October – a new six-year low.
The economy also added 214,000 jobs last month, according to figures released Friday by the Labor Department. Additionally, the department revised upward its estimates of job gains for August (203,000 instead of 180,000) and September (255,000 instead of 248,000).
Economists had been expecting a larger October number – around 235,000 jobs – but found the consistent growth heartening.
“Anyone disappointed by the October number, which came in below expectations ... needs to bear in mind that payrolls have now risen by more than 200,000 in each of the past nine months,” Chris Williamson, an economist with MFR Inc., writes via e-mail. “This means that, so far this year, the economy has added some 2.285 million jobs, of which 2.225 million were in the private sector. This has helped bring the jobless rate down sharply from 7.2 percent a year ago…. The sustained impressive rate of job creation has corresponded with a strong run of economic growth, which looks to have persisted into the fourth quarter.”
It was the 56th consecutive month of private sector job growth, which Jason Furman, chairman of President Obama’s Council of Economic Advisers, called an extension of “the longest streak in history,” Since the beginning of 2014, the unemployment rate has declined by 0.8 percentage points, and the number of unemployed workers has fallen by 1.2 million.
“Nit-picking aside, this was a very much ‘as expected’ report in terms of the establishment survey,” MFR Inc. economist Joshua Shapiro wrote via e-mailed analysis. “The separate household survey was, however, very strong … hence a 0.1 percent decline was reported in the unemployment rate to 5.8 percent (versus a median forecast of no change) that occurred for all the ‘right’ reasons.
Most of the smaller, supporting figures in the October report were also strong. The length of the average workweek rose slightly, to 34.6 hours. Long-term unemployed, or people who have been out of work 27 weeks or more, stood at 2.9 million, but that’s 1.1 million fewer than the same time last year. And labor force participation – which has been sitting near historic lows thanks to the exodus of retiring boomers from the workforce and declining participation rates of very young workers – edged up slightly, to 62.8 percent. “As the labor market continues to recover, some of these discouraged workers will return to the labor force,” Mr. Shapiro writes.
One major sticking point remains, however, and it could be the last piece of the economic recovery puzzle. Wage growth continues to disappoint, rising just 3 cents an hour in October and remaining stuck at a 2 percent annualized rate, failing to keep pace with inflation. From a consumer perspective, this is a problem for obvious reasons. From an investor standpoint, however, it could prevent the Federal Reserve from raising interest rates sooner rather than later.
"Continued progress in labor markets will likely keep the Fed on a path to normalization, but it will likely remain patient during the transition, given modest wage and inflation pressures,” Barclays Research economist Michael Gapen wrote in an e-mailed report. “We maintain our view that it will raise rates in June of next year, with risks tilted toward September given the sharp decline in commodity prices.”
“As the labor market continues to pick up momentum, we would expect wage gains to accelerate modestly,” Shapiro adds.