The employment market strengthened in October, with nonfarm payrolls rising 531,000, according to the latest employment report released by the U.S. Bureau of Labor Statistics (BLS). The increase surpassed expectations after two months of weak employment gains in September and August.
October's growth was led by employees added in the leisure and hospitality sectors, the report indicated, as well as gains in the following industries: professional and business services, manufacturing, transportation and warehousing, construction and health care and retail.
In addition to job gains, the labor force participation rate remained unchanged at 61.6% and average hourly earnings increased 11 cents to $30.96 in October, the monthly jobs report showed.
"The job market showed strong growth in October, as expected, after two months of disappointing performance," said Dawit Kebede, Credit Union National Association (CUNA) senior economist. "As the Delta variant continues to decline, employment in leisure and hospitality is rebounding, signaling a return to normal economic activity."
An improving economy and higher wages could push interest rates higher as Americans grow more confident in the economy. If you want to take advantage of historically low interest rates, consider taking out a personal loan. Visit Credible to find your personalized interest rate while rates remain low.
Unemployment rate dips in October
The unemployment rate is slipping, coming down from last year’s high of 14.8% during the COVID-19 pandemic from February to April. But in October, the unemployment rate dropped to 4.6%, down 0.2 percentage points from the month before, bringing the number of unemployed persons to 7.4 million, according to the jobs report. Hiring continued to surge after added unemployment benefits expired in September.
"The unemployment rate dropped to 4.6%, continuing a very positive trend," said Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president and chief economist. "We see the unemployment rate dropping below 4% by the middle of next year, consistent with full employment. The number of unemployed individuals has now dropped by 3.6 million since October 2020, with both the short-term and long-term unemployment rates falling this past month."
As the economy continues to improve and monthly job growth continues, interest rates will continue to rise. If you want to take advantage of low rates now, consider refinancing your student loans and potentially save hundreds on your monthly payments. Visit Credible to compare multiple student lenders at once and choose the one with the best rate for you.
What does full employment mean for interest rates?
As the unemployment rate drops and the economy nears the 4% full employment mark, the Federal Reserve could come closer to raising the federal funds rate, which will push interest rates higher.
"The Federal Reserve announced the beginning of tapering, recognizing that the economy had made substantial further progress," Fratantoni said. "Today’s report shows that conditions continue to improve briskly, with implications for the Fed’s next move as the economy edges towards liftoff and reaches full employment."
And with the labor market making significant gains, economists say it could push the Fed to raise rates even sooner than previously expected.
"This is good news for the Federal Reserve who announced it will start tapering off its asset purchase program later this month," Kebede said. "As wages continue to rise and inflation concerns increase, a consistently strong job market makes it easier for the Federal Reserve to raise interest rates, if needed, earlier than planned."
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