The U.S. labor market received more positive news from the Labor Department in October, as the total nonfarm payroll employment increased by 214,000 and reached another milestone when unemployment fell to 5.8 percent—a new six-year low. In October, job growth occurred in food services and drinking places, retail trade and health care.
Food services and drinking establishments added 42,000 jobs in October, compared to this sector’s average gain of 26,000 jobs per month over the prior 12 months. Employment in retail trade rose by 27,000 in October, primarily through greater hiring in general merchandise stores (+12,000) and automobile dealers (+4,000). Retail trade has added a total of 249,000 jobs over the past year.
Within health care, 25,000 new jobs were created in October, consistent with the prior 12-month average gain of 21,000 jobs per month. Employment in ambulatory health care services added 19,000. Professional and business services gained 37,000 jobs last month, below the average job gains of 56,000 per month for the prior 12 months. Temporary help services added 15,000 jobs, while computer systems design and related services rose by 15,000.
, employment continued its upward trend by adding 15,000 new hires. Over the year, manufacturing
has gained 170,000 jobs, largely within durable goods.
Economic Outlook on a Solid Upswing
The overall economic picture continued to emerge as strong and on a solid upswing last month. The 214,000 jobs gained in October represented the ninth consecutive month the economy has created more than 200,000 jobs. This trend reinforces a sharp rebound from previous years of weak growth following the 2008 fallout and the first time the country has seen similar growth since 1994.
The U.S. economy has created 2.3 million jobs this year and is on track for its biggest gain in almost a decade. In addition, job openings recently hit a 13-year high, and layoffs have fallen to the lowest level since the turn of the century. The unemployment rate fell again in October to a six-year low of 5.8 percent, as nearly 700,000 people found work. And another 400,000+ joined the labor force; another healthy sign that people think more jobs are available.
Jobless Claims Continue to Decline
The number of Americans applying for new jobless benefits stayed below 300,000 for the eighth consecutive week. According to the Labor Department, initial jobless claims fell by 10,000 to a seasonally adjusted 278,000 in the week ended Nov. 1, the lowest number recorded in 35 years.
Meanwhile, the average of new jobless claims over the past month dropped by 2,250 to 279,000 and hit a 14-year low. Economists pay close attention to jobless claims because they are a good measure of whether layoffs are rising or falling. For example, most companies are currently operating under leaner staffing levels, and this trend combined with steady economic growth indicates employers are laying off fewer workers.
Wage Growth Still a Major Issue with Many Implications
Workers’ hourly earnings have been sluggish for months, and two-thirds of jobs created this year pay just above minimum wage, whereas less than 50 percent of jobs created in 2013 were considered low income. In October average hourly earnings for all workers on private nonfarm payrolls increased by three cents to $24.57, according to the Labor Department.
However, despite these numbers, many analysts believe the recent strong job gains and decreasing unemployment rate will ultimately lead to higher wages. The slow rate of pay increases has kept inflation well below the Fed’s 2 percent target rate, and the prospect of improving wages has sparked a debate as to when and how to raise interest rates, because there is a downside to rapid wage growth.
When pay rates rise too quickly, they can lead to runaway inflation and eventually impact corporate profits. The consensus among Federal economists is that rate increases should occur in mid-2015, early enough to stave off runaway inflation while remaining on the low side long enough to provide ongoing stimulus to the economic recovery. As such, wage growth will be a key indicator to watch over the next several months.
Small Businesses Lead Job Growth
Small businesses are the major engine fueling recent job growth. According to payroll provider ADP’s latest employment report, nonfarm private small business payrolls rose by 102,000 in October on a seasonally adjusted basis and accounted for 45 percent of employment gains across all payroll size groups. In fact, for the third consecutive month the nation’s smallest businesses contributed more openings than their slightly larger counterparts.
Within small businesses, 52 percent of employment growth contribution was from companies with between 1– 19 employees. The report showed the following job gains among small businesses across key sectors:
Goods Producing Sector
Services Providing Sector
- Small businesses (1 – 49 employees) +11,000
- Very small businesses (1– 19 employees) +5,000
- Other small businesses (20– 49 employees) +6,000
- Small businesses (1 – 49 employees) +91,000
- Very small businesses (1– 19 employees) +48,000
- Other small businesses (20– 49 employees) +44,000
Payroll processing company Intuit recently released its hiring index showing companies with fewer than 20 workers added 15,000 new jobs in October. This finding helped Intuit increase its monthly small business index to its highest point since 2009.
Employee and Consumer Confidence Rebound Slightly
Randstad’s October Employee Confidence Index, which tracks workers’ monthly perspectives around jobs and the economy, increased 1.8 points to 58.2 from 56.4 in September. Workers showed growing confidence in the strength of the economy, with 37 percent believing the economy is getting stronger, up from 31 percent the previous month. Employees also reported increased confidence in the availability of jobs, with 30 percent saying there were more jobs in October compared to 26 percent in September. Also, nearly five in ten workers (47 percent) are confident in their ability to find a new job.
Similarly, the Conference Board’s Consumer Confidence Index rebounded in October. The Index now stands at 94.5, up from 89.0 in September. A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation, according to the report. Consumers also have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential.