By guest author Ben Casselman from the New York Times
The Labour Department’s monthly data was held down in part by the General Motors strike.
■ 128,000 jobs were added last month, the Labour Department reported on Friday. Analysts surveyed by Bloomberg had expected a gain of about 85000.
■ The unemployment rate was 3.6 percent, up from 3.5 percent the month before.ab
■ Average hourly earnings rose 3 percent from a year earlier.
■ Estimates of job growth in August and September were revised upward by a combined 95000 jobs.
The Takeaway
The American job market has lost some momentum, but a major auto strike was not enough to knock it off the road in October.
Ordinarily, a gain of 128,000 jobs would count as an unimpressive month. But the figure looks stronger accounting for the strike at General Motors, which shaved close to 50,000 workers from the employment rolls. United Automobile Workers union members have since approved a contract and ended the strike, and the November report should get a lift from their return to work.
Even accounting for the strike, however, job growth has been slowing. Hiring has been particularly weak in manufacturing, a result of trade tensions and the cooling of the global economy. And there have been hints that the weakness is spreading — confidence among corporate leaders is falling, business investment is in a slump, and companies are posting fewer job openings.
So far, robust consumer spending has been able to keep the decade-long economic expansion on track. Friday’s figures — particularly the strong revisions to earlier data — should bolster that view.
“As long as confidence remains pretty elevated, as long as job gains continue albeit at a slower pace, and as long as those job gains continue to deliver wage growth, consumption should continue to drive the economy,” said Ben Herzon, an economist for Macroeconomic Advisers, a forecasting firm.
Losing Momentum?
The labour market has been a bastion of consistency throughout the economic expansion, steadily adding jobs despite natural disasters, government shutdowns and political turmoil. The United States has now experienced 109 straight months of job gains, more than double the previous record.
Lately, however, there have been signs that the jobs engine is losing momentum. Job growth has averaged 176000 jobs per month over the past three months, down from 222000 over the same period a year ago.
Hiring last year got a push from the 2017 tax cuts, so some slowdown was to be expected as the effects of the cuts wore off. The question is whether hiring stabilizes at a somewhat lower level or continues to fall. Friday’s report, though only a single data point, suggests stabilization is more likely.
“It’s still respectable,” said Julia Pollak, a labor economist for ZipRecruiter, an online job marketplace. “Slow and steady is not necessarily bad.”[Even with the low unemployment rate, many Americans are having trouble finding work after losing it.]
A sharper slowdown in hiring would be bad news for President Trump, who has made the strong economy a central selling point in his bid for re-election. And it could also raise concern at the Federal Reserve. Policymakers at the bank cut interest rates on Wednesday in a bid to shore up the economy, but signalled, that they would probably pause to assess fresh data before cutting again.
Counting on Consumers
Consumers have been the main pillar holding up the economy. So far, they’re doing fine — consumer spending was strong in the third quarter, helping to offset weakness elsewhere.
Those same patterns are playing out in the job market. Job growth in manufacturing, which experienced a mini-surge early in Mr. Trump’s term, has slowed recently, as has hiring in the oil patch. But the service sector has remained strong. Hotels and restaurants added more than 50,000 jobs in October, and even the struggling retail sector posted a second straight month of gains after months of steady losses.
“The story right now is about the mighty U.S. consumer,” Ms. Pollak said. “The consumer could help us weather all of these other risks and headwinds.”
That divergence cannot continue forever. Eventually, either businesses will start to cut jobs, a surefire way to erode consumers’ confidence, or free-spending shoppers will set executives’ minds at ease and encourage them to ramp up production again.
“At some point in time, either the business sector has to come back or the consumer will falter,” said Diane Swonk, chief economist for the accounting firm Grant Thornton.
One reason for concern: Hourly wage growth has stalled recently, after rising last year. Average earnings growth picked up slightly in October, and was also revised upward for September, but growth has slowed over the past year. The length of the average workweek has also fallen slightly, particularly in manufacturing. Without more pay and more hours, it will be hard for consumers to keep spending more money.
The Long View
In October 2009, the unemployment rate hit 10 %, the worst mark of the worst recession since the Great Depression. A decade later, the unemployment rate is hovering close to a 50-year low. There is no doubt that the economy has improved substantially during what is now the longest expansion in American history.
But by many measures, the labor market is still not as strong as at the peak of past economic cycles. A smaller share of working-age adults — particularly men — have full-time jobs, and wage growth has been slow.
“The question is always, ‘compared to what?’” said Oren Cass, a senior fellow at the Manhattan Institute, a right-leaning think tank. “We should certainly celebrate that the unemployment rate is low and that the expansion has gone on as long as it has.” At the same time, he said, “if you ask how does this look relative to 2006-2007 or 1999-2000, it just doesn’t look as good on almost any metric.”
Mr. Cass said the relative weakness was partly the result of long-term structural changes in the American economy. But it also suggests that there is room for further improvement if the expansion can continue. Jerome H. Powell, the Fed chair, has said that one reason policymakers are cutting interest rates is that the recovery is only now reaching people with criminal records, people with less education, or others who often face barriers to employment.