The U.S. Added 261,000 Jobs in October; Here’s the Upshot
Workers clearing debris from a cafe damaged by Hurricane Harvey in
Texas. The storm depressed September’s employment figures, keeping some leisure
and hospitality workers off the job, but their return and rebuilding efforts
improved the picture in October. CreditEric Gay/Associated Press
The hurricane-battered job market surged back to life in October, the
government reported on Friday, the latest sign that the American economy has
entered perhaps its strongest stretch of growth in years.
Yet the latest round of jobs data did nothing to resolve the question
that has bedeviled the economic recovery for years: When will job growth
translate into strong wage gains for American workers? Average hourly earnings
were 2.4 percent higher in October than a year earlier, barely keeping pace
with inflation.
Considering the tight labor market, with unemployment at its lowest
level since Bill Clinton was president, many economists say the dividends have
been paltry.
“It’s certainly trending the right way, but it’s surely still unexciting
— even unacceptable — wage growth at this point,” said Dan North, chief
economist at Euler Hermes North America.
Change in Jobs
Source: Bureau of Labor Statistics
Employers added 261,000 jobs in October, the Labor Department said, the most in more than a year. A strong
rebound in job creation had been expected after hurricanes in Florida and Texas
kept tens or even hundreds of thousands of workers away from work — and off
payrolls — in September.
The storms’ effects were clearest in the weather-dependent leisure and
hospitality sector, which lost 102,000 jobs in September, then gained them all
back and more — 106,000 jobs — in October.
Hospitality Jobs
Note: Data is seasonally adjusted. | Source: Bureau
of Labor Statistics
The hurricanes’ damage to the labor market also was not quite as bad as
initially believed. The Labor Department on Friday revised its estimate of
September payrolls from a decline of 33,000 — the first net loss in jobs in
seven years — to an 18,000-job gain. With the revision, the economy has now
added jobs for 85 straight months, a record.
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Economists recommended
setting aside both the September and October reports and instead focusing on
the longer-term picture. The United States has been adding about 170,000 jobs a
month this year, the slowest pace since 2010 but still a rate most economists
consider fundamentally healthy.
The unemployment rate,
meanwhile, fell yet again to 4.1 percent, its lowest level since 2000. The
labor force shed 765,000 workers in October, but most economists dismissed the
drop as a correction after four straight months of gains.
Source: Bureau of Labor Statistics
“The trend is rock-solid,”
said Ryan Sweet, director of real-time economics at Moody’s Analytics. “The
labor market just continues to chug along, and it’s showing very little
evidence of slowing.”
Indeed, there are signs
that the economy as a whole is gaining strength. Last week, the government
reported that gross domestic product rose at a 3 percent annual
rate in the
third quarter, the second-straight quarter of solid growth. Consumer spending,
the dominant driver of economic growth in recent years, has stayed strong:
Retail sales posted a big gain in September, and consumer confidence hit a nearly 17-year high this week.
But consumers are no longer
alone in driving the economy forward. Stronger global growth (along with a
weaker dollar) has led to higher demand for American goods and services in
recent months, aiding the manufacturing sector and increasing exports.
“It’s finally feeling like
the economy is starting to fire on multiple cylinders rather than relying
solely on consumers,” said Brett Ryan, an economist at Deutsche Bank in New
York.
President Trump hailed the
strong jobs report on Friday afternoon, tweeting “JOBS, JOBS, JOBS!” Many
economists, however, argue that the president deserves little credit for the
strong job market, which predates his time in office. And the recent run of
strong economic data could complicate the Republican argument that a tax cut is
needed to promote economic growth.
The solid jobs figures on
Friday, combined with the other recent economic data, also make it likely that
the Federal Reserve will push ahead with plans to raise interest rates despite
sluggish inflation. The Fed this week left interest rates
unchanged but
hinted that it expected to raise rates at its December meeting unless the
economy changes course.
The strong economy,
however, only adds to the enduring mystery of anemic wage growth. Average
earnings actually fell slightly in October compared with September, and
although that was partly a statistical quirk caused by the hurricanes, the
slowdown was larger than most economists expected. The year-over-year pace of
growth, at 2.4 percent, was the weakest since early last year.
Source: Bureau of Labor Statistics
The problem is hardly a new
one. Throughout the recovery, there have been predictions that wage growth
would accelerate as unemployment fell. And throughout the recovery, those hopes
have been dashed. Mark Hamrick, a senior economic analyst for Bankrate.com,
likened wage growth to a baseball team that keeps crushing fans’ hopes for a
championship.
“We’ll continue to ‘wait
till next month’ for better growth in wages,” Mr. Hamrick said. “It’s been
disappointing for years now.”
There are hints of
progress. Earnings growth, at least before adjusting for inflation, has
accelerated a bit in recent years. And more sophisticated measures show
somewhat stronger gains. The Employment Cost Index, a measure of compensation
that considers benefits as well as cash pay, was up 2.5 percent in the third
quarter from a year earlier, its fastest pace in two and a half years.
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Some industries are seeing
faster growth — and not just for high-earners. In recent months, there have
been hints that wage gains are filtering down to workers in fast food and other
low-wage industries. In September, the retail giant Target announced that it
was raising pay for all its workers to at least $11 an hour and would pay at least
$15 an hour by the end of 2020. That move, and others like it, is putting
pressure on other low-wage employers to increase pay.
“It’s really hard to retain
employees when those companies are saying, ‘Any employee in our company is
getting at least $15 an hour,’” said Jennifer Durham, chief development officer
for Checkers and Rally’s, a drive-through burger chain with 860 locations
across the country.
So far, however, Checkers
and Rally’s has resisted broad-based pay increases, choosing instead to focus on
helping employees earn more through advancement.
“Base pay is a starting
point, but it’s not the entire proposition,” Ms. Durham said.
Republicans in Washington
in recent weeks have proposed their own solution to slow wage
growth: lower taxes
on businesses, which they argue would lead to big pay increases for workers.
Many economists are skeptical that companies would pass tax savings on to
workers, or argue that the benefits of the Republicans’ proposed tax plan would
be far smaller than its authors claim.
Instead, economists point
to another factor holding back wage gains: productivity. Growth in productivity
— how much workers can produce in an hour, on average — has been slow, making
it harder for companies to improve wages without eating into profit margins.
“It’s hard to get wages
really taking off without productivity growth,” Mr. Ryan said.
Productivity growth
accelerated in the third quarter, though it is too soon to know whether the
that represents the start of a longer-lasting rebound. And despite the
disappointing pay data, there are signs that companies are being forced to work
harder to attract employees, and to keep the ones they have from bolting to
competitors. A report from the payroll-processing firm ADP this month found
that people who switch jobs are seeing significant pay gains, which suggests
workers are jumping ship in search of better opportunities.
David Staszewski, executive
vice president of sales for Wireless Zone, a cellphone retailer, said that over
the last six months, the company’s franchisees had increasingly complained
about holding on to workers. Many of them have had to raise pay or restructure
commissions to keep employees, he said.
“They’ll move at the blink
of an eye and really not care,” Mr. Staszewski said. “A friend of theirs will
call up and say, ‘Hey, it’s better over here,’ and they will up and leave.”
Correction: November 3, 2017
An earlier version of this
article misstated the labor-force trend for October. The labor force fell by 765,000; it did not grow.
Define in which verbal time the following sentences are found:
The Labor Department released its official hiring and unemployment figures for October on Friday morning _________________
Change in Jobs
Source: Bureau of Labor Statistics
• The economy added 261,000 jobs last month.________________Wall Street economists surveyed by Bloomberg had expected a jump of 325,000 as the economy bounced back from September’s hurricanes.______________
• In September, the economy gained 18,000 jobs, according to a revised estimate released Friday._________________The Bureau of Labor Statistics initially estimated that employers cut 33,000 jobs in September._________________The bureau also revised up its estimate of August jobs growth by 39,000 jobs._______________
Source: Bureau of Labor Statistics
• The unemployment rate was 4.1 percent, the lowest since December 2000. September’s jobless rate was 4.2 percent._________________
• Average earnings fell by 1 cent an hour; they are up 2.4 percent over the past year._________,_____________
The Takeaway
The job market rebounded in October from its hurricane-induced September slump.________________ Hurricanes Harvey and Irma had kept tens or even hundreds of thousands of workers away from work — and off payrolls — in Florida and Texas, depressing September’s figures.______________Most of those employees returned to work in October, and the job market, like the economy over all, appears to be back on track.____________________ (Puerto Rico is still reeling from Hurricane Maria. The surveys that the Bureau of Labor Statistics uses for the monthly jobs report, however, do not include the island)___________,_____________________
With Friday’s revision to September’s figures, the economy has now added jobs for 85 consecutive months, a record._________________
“The bigger picture here is that the labor market’s fine,”________________ said Brett Ryan, an economist at Deutsche Bank in New York.
Now that the storms have passed, the focus can return to the central question for the United States job market: With unemployment low, when will wage
growth accelerate? Average hourly earnings have been rising at an annual rate of about 2.5 percent in recent months — faster than inflation but below the level most economists would expect with the unemployment rate below 4.5 percent.___________________Friday’s report offered little encouragement on that front,__________________as hourly wages fell slightly from September and the year-over-year rate of growth slowed.
“It’s certainly trending the right way, but it’s surely still unexciting — even unacceptable — wage growth at this point,” said Dan North, chief economist at Euler Hermes North America.
Friday’s numbers are preliminary and will be revised at least twice in coming months._________,_____________ They are also subject to large margins of error — so consider the numbers,____________ especially the month-to-month changes, with caution.
The Storm Effect
Workers clearing debris from a cafe damaged by Hurricane Harvey in Texas. The storm depressed September’s employment figures, keeping some leisure and hospitality workers off the job, but their return and rebuilding efforts improved the picture in October.____________________ CreditEric Gay/Associated Press
The Bureau of Labor Statistics initially estimated that the United States lost 33,000 jobs in September,_______________the first net decline in payrolls in seven years. (Those figures were revised Friday morning to show a gain of 18,000.)________________ But those figures were heavily skewed by the hurricanes, which kept some 1.5 million workers off the job._________________Most economists expected a strong recovery in October, as displaced employees returned to work and as the rebuilding effort generated even more demand for labor.___________________
The storms’ effects are clearest in the leisure and hospitality sector, which is highly weather-dependent._______________The industry saw employment fall by 102,000 jobs in September, then gained them all back and more — 106,000 jobs — in October.________________
Hospitality Jobs
Note: Data is seasonally adjusted.__________________ | Source: Bureau of Labor Statistics
As a result, it’s probably best not to pay too much attention to either September or October’s figures, at least not on their own. Rather, most economists recommend focusing on the broader trend. Before the hurricanes, employers were hiring at the pace of about 170,000 jobs per month this year.__________________ That’s down from an average of about 190,000 in 2016 and nearly 230,000 in 2015, but it still represents a solid
pace of growth, and should be enough to keep pushing the unemployment rate down and drawing new people into the work force.
Waiting on Wages
Average earnings rose 12 cents an hour in September, according to the government’s preliminary estimate. That jump, one of the biggest one-month gains on record, may have been at least partly a result of the hurricanes — with many low-wage restaurant and hospitality workers pushed out of the work force, at least temporarily, the average wage was nudged higher._________________ The average fell by 1 cent an hour in October,_______________ and return of those workers may have helped bring the figure down._________________
Even accounting for the hurricanes, however, Friday’s report was a disappointment.________________ Many economists expected slower wage growth in October, but few expected an outright drop.___________________And while the month-to-month figures are volatile, the annual rate of growth also slowed.__________________
Over the longer run, wages have been rising faster than inflation, but slowly by historical standards. That wasn’t a surprise early in the recovery,_____________ when there were millions of unemployed workers clamoring for jobs — and giving employers little incentive to raise pay.__________,______________.But the unemployment rate hit 4.2 percent in September, lower than it ever got during the previous economic expansion. Standard economic models suggest that should lead to faster wage growth.
“We’ve been lamenting for a year about how we’ve had this great,__________,___________ really low unemployment rate and yet the wage growth is not coming up to what we’d expect historically at these levels,” said Catherine Barrera, chief economist at ZipRecruiter, an online job site.
There are reasons for optimism.______________ Wage growth has been picking up in recent months, albeit gradually._________________ The Employment Cost Index, a more sophisticated measure of compensation that considers benefits as well as cash pay, was up 2.5 percent in the third quarter from a year earlier, its fastest pace in two and a half years.
The Labor Force
The September report may have been disappointing when it came to job growth,_____________ but another key measure of labor market health was much more encouraging: The unemployment rate fell to 4.2 percent, the
lowest it has been since 2001.________________Even better, the labor force grew, a sign that strong hiring and faster wage growth have been tempting people back into the job market.___________,_____________.
The October report was more mixed.______________The unemployment rate fell further, to 4.1 percent. The labor force, however, fell by 765,000.________________
The labor force is fighting against a strong demographic headwind: the retirement of the baby boom generation.______________The participation rate — the share of adults who are either working or actively looking for work — is near multi-decade lows, largely because of the aging population.__________________ In recent months, however, the participation rate had begun to edge back up, as the strong job market drew idle workers off the sidelines.________________
Mr. Ryan said Friday’s report suggested that there simply aren’t many workers left to attract.___________,_____________
“With jobless claims at 45-year lows, there’s really not a lot left on the sidelines,” Mr. Ryan said. “We’re at full employment”___________________
A Construction Shortage?
The hurricanes created a demand for workers to rebuild homes, roads and other structures damaged by the storms.____________________ That led some economists to expect a surge in storm-related hiring. But Friday’s report showed little evidence of that — the construction sector added a modest 11,000 jobs in October, the same as September.
One possible reason for the misfire: a shortage of workers in the industry, something companies have long complained about.________________ The issue is especially acute in skilled trades, where training requirements make it hard to fill jobs quickly.____________________
“I’ve heard some anecdotal evidence that construction companies are having difficulty finding enough labor,” Ms. Barrera said. “Certainly the demand is there. The question is, is there enough supply of people working in construction?”_____________
There isn’t much evidence in workers’ paychecks that points to a shortage, however.__________________ If companies are struggling to find workers, economists would expect them to be increasing wages to attract and retain employees._______________________But pay for construction workers actually declined slightly in October.____________________
The Retail Slump
Retailers cut 8,000 jobs in October, the eighth time in nine months that employment has declined in the sector._______________________(Revisions did turn what was initially reported as a September job cut into a modest gain)_____________________
Retailers are struggling despite a consumer economy that is humming as the holiday shopping season approaches.____________________ Retail sales posted a big gain in September, and consumer confidence hit a nearly 17-year high earlier this week._______________________But brick-and-mortar retailers are struggling in the face of competition from Amazon and other online sellers.______________________
“The issue is really the structure of the industry,” said James Sweeney, chief economist for Credit Suisse in New York._________________“The problem is certain business models are becoming obsolete as the world changes”______________________
The Economic Context
Not only is the job market fundamentally healthy, there’s no sign that the broader recovery is losing steam._______________If anything, it seems to be gaining strength_________________ Last week, the government reported that gross domestic product rose at a 3 percent annual rate in the third quarter________________ Consumer spending, the dominant driver of economic growth in recent years, has stayed strong._______________________But consumers are no longer alone in driving the economy forward._______________________Stronger global growth has led to higher demand for American goods and services_________________
“It’s finally feeling like the economy is starting to fire on multiple cylinders rather than relying solely on consumers_____________
The strong economic data is part of what will most likely give the Federal_________________
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