The labor market held firm in October, providing more evidence to support the contention that the US economy is reasonably resilient in the face of headwinds from trade and political uncertainty.
Total nonfarm payrolls rose 128k in October, more than the 85k consensus was expecting. The unemployment rate ticked higher to 3.6%.
Revisions added a whopping 95k to September and August.
Private payrolls rose a much better than expected 131k. That’s above even the most optimistic estimate.
Average hourly earnings rose a cooler-than-expected 0.2% MoM. The YoY print is 3%, in line with expectations. That underpins the subdued inflation narrative, which is more good news if you’re looking for a “Goldilocks” environment.
The three-month average on the headline payrolls number moves to 176k.
Around 45,000 GM workers were on strike during the survey period, which muddied the waters a bit ahead of the report. Manufacturing payrolls fell 36k in October. That was less than expectations. Payrolls at motor vehicles and parts manufacturers dropped 41,600, reflecting the strike activity.
Headed in, Barclays noted that around 46k striking workers would likely fall off manufacturing payrolls temporarily. BofA, whose economists were expecting a much weaker 25k headline print, had predicted that “the fallout from the General Motors-United Auto Workers strike could be a drag of as much as 150k on payrolls in October”. Goldman had flagged “weakness in service-sector employment surveys and a seasonal echo from the timing of 2017 and 2018 hurricanes” as factors potentially arguing for a weaker report. The bank also noted that the September tariff escalation “may have weighed on hiring in the manufacturing, retail, and transportation sectors”.
So much for all of that.
Federal government employment dropped 17k “as 20,000 temporary workers who had been preparing for the 2020 Census completed their work”, the BLS says.
September’s report suggested the labor market was cooling, along with the rest of the economy. The numbers for October appear to tell a different story and could embolden the optimists.
The numbers come on the heels of a stronger-than-expected ADP report on Wednesday which, while ahead of estimates for October, was accompanied by a downward revision to the September number. “Job growth has throttled way back over the past year. The job slowdown is most pronounced at manufacturers and small companies”, Mark Zandi said.
Thursday’s session was marred by the worst read on the Chicago PMI since 2015, raising the stakes for Friday’s ISM print.
This week also brought the first look at third quarter GDP. Although growth is still hovering just below 2%, the economy is leaning very hard on the consumer. Business spending is lackluster and it seems clear that overall growth will decelerate going forward.
Estimates and priors
- Labor Force Participation Rate, est. 63.1%, prior 63.2%
- Change in Nonfarm Payrolls, est. 85,000, prior 136,000
- Change in Private Payrolls, est. 80,000, prior 114,000
- Change in Manufact. Payrolls, est. -55,000, prior -2,000
- Unemployment Rate, est. 3.6%, prior 3.5%
- Average Hourly Earnings MoM, est. 0.3%, prior 0.0%
- Average Hourly Earnings YoY, est. 3.0%, prior 2.9%
- Average Weekly Hours All Employees, est. 34.4, prior 34.4
- Underemployment Rate, prior 6.9%
Actual
- U.S. Oct. Nonfarm Payrolls Rose 128k; Unemp. Rate at 3.6%
- Nonfarm payrolls forecast est. 85k, range 25k-140k from 80 economists surveyed
- Nonfarm payrolls, net revisions, 95k from prior two months
- Participation rate 63.3% vs prior 63.2%
- Avg. hourly earnings 0.2% m/m, est. 0.3%, prior unchanged
- Y/y 3.0%, prior 3.0%; est. 3.0%
- Nonfarm private payrolls rose 131k vs prior 167k; est. 80k, range 40k-120k from 31 economists surveyed
- Manufacturing payrolls fell 36k after falling 5k in the prior month; economists estimated -55k, range -75k to -40k from 21 economists surveyed
- Unemployment rate 3.6% vs prior 3.5%; est. 3.6%, range 3.5%-3.6% from 77 economists surveyed
- Underemployment rate 7% vs prior 6.9%
- Change in household employment 241k vs prior 391k
What percentage were low wage/no benefit jobs? Waitresses and home health aides get paid jack.
hang on there. that depends on what you mean by “waitresses”. remember, any numbers you see reported for what “waitresses and bartenders” make are understated by nearly half. I used to giggle at how naive one website was when they made fun of additions to “waitress and bartender” payrolls. most cash tips are not reported. although the percentage of tips left in cash has obviously declined substantially with the proliferation of debit cards and other forms of digital payments, you also have to remember that most “regulars” at bars and restaurants know to tip in cash so that their favorite bartenders and servers don’t have to report it. point being, whatever you think a “waitress” makes, you can add ~40% to that. a waitress in Manhattan can easily make $100k, but crucial thing to remember is, that number doesn’t fall in lockstep with the cost of living. So, for instance, a waitress in a small city won’t make the $100k that one in Manhattan would make, but can still make $65k, with a cost of living that is 75% to 80% lower than the cost of living in NYC.
when I studied this in grad school, most waiters and bartenders at high-end restaurants in the area made nearly twice as much as adjunct faculty members at the university. that was a long time ago, but i imagine it’s still some semblance of true, if not more so given how hard colleges are leaning on adjuncts to cut costs
another true story: i once knew a guy (actually got to be good friends with him) who figured out how to game the system. he worked just enough hours at a salaried restaurant job (i.e., as a cook) to get the benefits, and then above and beyond that minimum threshold for hours, he worked at the “front-end” of the same place waiting tables. so, he got a paycheck, benefits, and tips. it was a low-end place, so he still didn’t make much, but the last time i spoke to him (admittedly like 13 years ago), he was in a small town making nearly $50k with benefits, and all from a low-end restaurant, and his effective tax rate was much lower than it should have been because by virtue of it being a low-end restaurant, mot of the tips actually were in cash (because the average tickets were very low, most people just left loose change and loose dollar bills). he reported virtually none of those tips
Anecdotal. Where was I just reading that most servers end up making just above the minimum wage and often are subject to uncertain hours. Sure, a senior server at a posh NYC restaurant can potentially rake in big bucks, but the poor souls working at Fat Al’s Cafe aint so lucky.
That said, the preponderance of restaurant/hospitality along with medical hiring since 2009 helps explain the tepid wage and retail sales growth we’ve seen. It also may help explain why we see wage growth pick up every January, when the minimum wage hikes have kicked in, and then drop back.
I can promise you that much of my assessment above is not merely “anecdotal”. And no, you do not have to work at a “posh” NYC restaurant to make good money in food service. That just isn’t true. And neither is this: “…most servers end up making just above the minimum wage”.
Again, there is no way for anyone to know that because servers do not report between 30%-40% of their income to the government. They just don’t. They never have and they never will. And there is no way for the government to verify servers’ income. It simply isn’t possible.
Obviously, that’s not to say that waiters and bartenders are among America’s “elite”, but it is definitely to say that unless you’re talking about Waffle House, servers and bartenders make a lot more than you think they do. Their spending habits and financial discipline are a whole different matter.
Wait isn’t that still slower than before? Just not as slow as predicted. 128k is on the low end for the last several years. Most months average around 200k.
What is the breakdown between well-paying jobs and Waffle House service jobs? Nor is it only front end staff in those stats. Sure – local “celebrity chefs” can do well, but the dishwashers and prep cooks? Nor can you convince me that hotel room cleaners live high on the hog from tips.
The same applies in the healthcare category. It’s not all MDs and RNs. Home health aides are lucky to earn a dollar or two over the minimum wage (well below what their agency charges the customer).
Look at the income and sales figures. There are reasons they are so tepid given the total hiring numbers. I think the category breakdown pre and post 2008 helps explain much of it.
But what do i know?
Oct 128K + 40K strike = 168K.
Sep 180K (adjusted) -27K census = 153K.
Considering the error bars (wide), seems like monthly jobs running somewhere in the 150-170K range.