A very strong report putting to rest questions about the strength of the expansion

October jobs report: a very strong report putting to rest questions about the strength of the expansion

 In the light of the last two month’s relatively “poor” jobs readings, an important question was what was going to happen with revisions. As we will see below, they really delivered! – big positive revisions to both of the last two months’ numbers. Additionally, I have been watching manufacturing hours and payrolls, to see if that white-hot sector was holding up in the face of supply bottlenecks. Also important are whether there were continued gains in leisure and hospitality jobs, or whether Delta had caused those to stall. Both of these metrics also were very positive this month.

The 6 month average of monthly gains as of now is 665,000 – not bad at all! But we still have 4.2 million jobs to go to equal the number of employees in February 2020 just before the pandemic hit. If you are doing math, that’s about 7 more months at this rate.

Here’s my synopsis of the report

HEADLINES:

• 531,000 jobs added. Private sector jobs increased 604,000, but government (mainly education) shed -73,000 jobs, having a great deal to do with haywire seasonal adjustments this year, and specifically public education, which shed -65,000 jobs. The alternate, and more volatile measure in the household report indicated a gain of 142,000 jobs – a relatively poor number – which factors into the unemployment and underemployment rates below.
• The total number of employed is still -4,204,000, or -2.8% below its pre-pandemic peak.  At this rate jobs have grown in the past 6 months (which have averaged 665,000 per month), it will take another 7 months for employment to completely recover.
• U3 unemployment rate declined -0.2% to 4.6%, compared with the January 2020 low of 3.5%.
• U6 underemployment rate declined -0.2% to 8.3%, compared with the January 2020 low of 6.9%.
• Those not in the labor force at all, but who want a job now, rose 9,000 to 5.978 million, compared with 5.010 million in February 2020.
• Those on temporary layoff decreased 68,000 to 1,056,000.
• Permanent job losers declined -125,000 to 2,126,000.
• August was revised upward by 117,000, while August was revised upward by 118,000, for a net gain of 235,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge how strong the rebound from the pandemic will be.  These were positive:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 40.3 hours.
• Manufacturing jobs increased 60,000. Since the beginning of the pandemic, manufacturing has still lost -270,000 jobs, or -2.1% of the total.
• Construction jobs increased 44,000. Since the beginning of the pandemic, -150,000 construction jobs have been lost, or -2.5% of the total.
• Residential construction jobs, which are even more leading, rose by 1,800. Since the beginning of the pandemic, 45,100 jobs have been *gained* in this sector, or +5.4%.
• temporary jobs rose by 41,000 – a huge gain! Since the beginning of the pandemic, there have still been 173,300 jobs lost, or -5.9% of all temporary jobs.
• the number of people unemployed for 5 weeks or less decreased by -152,000 to 2,085,000, which is now *lower* than just before the pandemic hit.
• Professional and business employment increased by 100,000, which is still -215,000, or about -1.0%, below its pre-pandemic peak.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.10 to $26.26, which is a 5.8% YoY gain. This continues to be excellent news, considering that a huge number of low-wage workers have finally been recalled to work. 

Aggregate hours and wages:

• The index of aggregate hours worked for non-managerial workers rose by 0.3%, which is a  loss of -2.5% since just before the pandemic.
•  The index of aggregate payrolls for non-managerial workers rose by 0.7%, which is a gain of 6.7% (before inflation) since just before the pandemic.

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, gained 164,000 jobs, but are still -1,383,000, or -8.2% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments gained 119,400 jobs, and is still -784,300, or -6.4% below their pre-pandemic peak.
• Full time jobs increased 279,000 in the household report.
• Part time jobs increased 159,000 in the household report.
• The number of job holders who were part time for economic reasons declined by -45,000 to 4,423,000, which is an increase of 25,000 since before the pandemic began.

SUMMARY

With the exception of the “relatively” poor gain of 142,000 in the more volatile household report (still up an average of 477,000/month over the past 6 months), the decline in education jobs (almost certainly due to seasonality issues caused by the pandemic), and a slight decline in the manufacturing workweek, everything about this report was positive to strongly positive.

To begin with, the last two reports got revised significantly higher. In fact, August is now 248,000 higher than when first reported. The average gain for the last 6 months remains over 600,000. All of the leading jobs sectors showed gains. Both full time and part time employment showed gains. Involuntary part-time employment is virtually back to where it was before the pandemic hit. Wages for non-managerial workers continued to increase sharply. Those on temporary layoff are down to 2015-16 levels. 

There is still substantial ground to be made up. As indicated above, we are still 4.2 million jobs below where we were in February 2020. At the current rate, it will take until next May to make up the remaining difference. Total hours worked are still -2.5% below their pre-pandemic peak, and there are still about 750,000 more permanent job losers than there were before the pandemic hit.

This was a very good report, putting to rest many questions about whether the recovery was faltering.