U.S. payrolls increased by 531,000 in October, the Labor Department announced Friday, as the national unemployment rate fell to 4.6%. The stronger-than-expected results are boosting confidence that the recovery from the Covid-19 pandemic continues to gather steam.
“This is the kind of recovery we can get when we are not sidelined by a surge in Covid cases,” economist Nick Bunker of the job search site Indeed told CNBC. “If this is the sort of job growth we will see in the next several months, we are on a solid path.”
In addition, the numbers from previous months were revised upwards, indicating the jobs recovery may have been stronger in late summer than economists initially thought. The job growth number for August was revised to 483,000, an increase of 117,000 from the initial reading, and the number for September is now 312,000, an increase of 118,000.
Employers continue to report difficulty hiring workers, and the demand for workers amid a persistent shortage helped push wages higher, with average hourly wages for private-sector workers rising 0.4% from September to October. On an annual basis, wages are up 4.9% – an exceptionally high level that is largely being erased by exceptionally high inflation.
The long-term trend: The U.S. has now recovered 81% of the jobs lost during the pandemic, with more than 18 million people returning to work, leaving the economy about 4.2 million jobs below the pre-pandemic peak of February 2020. However, if lost job growth is taken into account – that is, the jobs that would have been created in the absence of the pandemic – the hole is quite a bit deeper. According to Ian Shepherdson of Pantheon Economics, the number of missing jobs is nearly 9 million. “That should be the goal,” Shepherdson tweeted Friday.
In an increasingly worrying sign, the labor force participation rate has seen little change. About 61% of the potential labor force is currently working or looking for a job, roughly the same level as a year ago and close to lows not seen since the 1970s.
“Initially we thought it would be the end of unemployment insurance with 25 states ending those over the summer, but we really didn’t see an increase in participation,” Veronica Clark, an economist at Citi, told The Washington Post. “It’s childcare issues. It’s Delta. It’s almost like we keep making up stories why the participation rate isn’t coming back. But it could be something more structural."
The persistent weakness in labor force participation has more economists thinking about a possible structural change, driven in part by the early retirement of millions of baby boomers during the pandemic. “While the strength of employment was an encouraging sign that labor demand remains strong, labor supply remains very weak,” economist Michael Pearce of Capital Economics wrote in a note to clients. “We’re increasingly convinced that the fall in participation since the beginning of the pandemic will prove permanent.”
Joseph Brusuelas, chief economist at the consulting firm RSM, said he will be watching two demographic groups carefully in the coming months: baby boomers and prime-working-age women who have dropped out of the labor force in significant numbers. In the past, those groups have started to trickle back into the workforce once the unemployment rate drops below 5%. If they don’t come back, that would “signal what lasting structural damage there is to the workforce from the pandemic," Brusuelas told CNN.
