The U.S. jobless rate fell to a 17-year low in October and employers hired at a strong pace, showing the labor market bounced back from recent hurricanes.
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Nonfarm payrolls rose a seasonally adjusted 261,000 in October, the Labor Department said Friday. That was a pickup from the prior month, but undershot economists' expectations for 315,000 new jobs.
Meantime, the unemployment rate ticked down to 4.1%, its lowest level since December 2000. The jobless rate, which changed little over the course of 2016, has dropped from 4.8% to 4.1% since the start of this year, a sign the labor market is heating up.
Nonetheless, wages failed to break out in October, rising 2.4% from a year earlier, a slowdown from the prior month.
"With the swings from the hurricanes now largely behind us, the longer-term challenge of wage growth returns to the foreground," said Jed Kolko, chief economist at job site Indeed.
September's payrolls data, initially reported as the first drop in seven years, were revised to show employers actually created 18,000 new jobs that month, extending the economy's streak of job gains to a record 85 straight months.
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When combined with August and September's job growth, estimates of which were revised up, the October report shows the economy added jobs over the last three months at a pace of 162,000 a month.
The picture was distorted for a second straight month by the impact of Hurricane Harvey, which hit Texas in late August, and Irma, which hit Florida in early September.
Service-sector employment, which took a major hit in September due to the hurricanes, contributed to the lion's share of October's jobs growth as employers restaffed restaurants, bars and cafes they had shuttered for the storms. The leisure and hospitality sector added 106,000 jobs after losing 102,000 in September.
While job creation was broadly strong, the report contained a few shadows, like a softening in wages. Average hourly earnings for private-sector workers decreased by 1 cent, or 0.04%, last month to $26.53 an hour. That fell short of economists' expectations for a 0.2% monthly gain.
What's more, the labor-force participation rate, a measure of all the potential workers who are working or want to be working, fell by 0.4 percentage point to 62.7% in October, the lowest reading since May. A higher rate is considered better, because it shows more people are in the workforce, helping the economy to grow. During the dot-com boom of the late 1990s and early 2000s, labor-force participation rate was around 67%, but it has fallen steadily since to levels not seen since the late 1970s.
Friday's payrolls data suggest the labor market remains on a solid trajectory, despite September's blip. It follows other positive signals on the economy's trajectory. Gross domestic product, the broadest measure of goods and services produced in the U.S., expanded at a 3% annual rate in the third quarter, the Commerce Department said late last month. That capped the economy's best six-month stretch of growth in three years, despite the two hurricanes, as soaring stock prices and rising business and consumer confidence boosted economic growth.
Gauges of consumer confidence, crucial in an economy which counts on consumer spending for about two-thirds of economic output, have been upbeat in recent weeks. A measure of U.S. consumer sentiment compiled by the University of Michigan hit its highest level since 2004 last month, driven by households' more favorable assessment of their current economic conditions and future prospects.
The Conference Board on Tuesday said its October index of U.S. consumer confidence hit its highest level for the since December 2000.
October's jobs report comes two days after the Federal Reserve held short-term interest rates steady at its last policy meeting, but suggested it remained on course to lift them before year's end given the economy's "solid" growth rate.
The strength of the labor market plays an important role in the Fed's decision making, alongside inflation and economic growth, and Fed officials will likely view the latest jobs report as strong in terms of hiring, even if wage growth was disappointing. A tighter labor market should lead to better paychecks and ultimately stoke consumer inflation.
The central bank cited ongoing strength in the labor market when it last raised rates in June, to the current range between 1% and 1.25%. Officials have penciled in one more move for 2017 if the economy stays on track, and the Fed has one more meeting scheduled before the end of the year, on Dec. 12-13. Policy makers will see one further payrolls report, for November, before that meeting.
In October, 6.52 million workers who wanted a job couldn't find one. And a broad measure of unemployment that includes Americans stuck in part-time jobs or too discouraged to look for work fell to 7.9%, matching its lowest level since 2006.
Write to Harriet Torry at email@example.com
(END) Dow Jones Newswires
November 03, 2017 10:56 ET (14:56 GMT)