The US economy added 261,000 jobs in October, the government said Friday.
That was far more than expected. Consensus was 193,000 headed into the release. The range of estimates, from more than six-dozen economists, was 80,000 to 300,000.
Last month’s gains brought the total for 2022 to 4.068 million (figure below).
Revisions subtracted 23,000 from August, but added 52,000 to September’s total, which now stands at 315,000.
Gains were generally broad-based, but leisure and hospitality added just 35,000 positions last month. Hiring in food services and drinking places was just 6,000. Apparently, the restaurant and bar recovery is all but over. Maybe there’s a seasonal there. I don’t know. Even if I did, the economy is so off-kilter it’d be largely irrelevant. The hurricane might’ve played a role (see the comments, below). For context, October’s gain in leisure and hospitality was less than half 2022’s monthly average.
Manufacturing payrolls were strong, in defiance of a weak ADP factory print and a middling (literally) read on ISM manufacturing’s employment gauge. Private payrolls rose 233,000, almost exactly in line with the ADP headline.
The unemployment rate moved up to 3.7%, matching the highest estimate, but participation ticked lower again to 62.2% (figure below). That combination isn’t likely to elicit any cheers. Note that the household survey printed a sizable decline of 328,000.
Although a higher unemployment rate is consistent with the Fed’s goal of cooling the economy, policymakers want more labor supply, not less of it.
Average hourly earnings were hotter than expected on a MoM basis. The 0.4% gain outstripped the 0.3% consensus. The 12-month pace, at 4.7%, matched estimates.
Some of the drama around the release was removed by Jerome Powell’s hawkish press conference following the ostensibly (but not really) dovish November FOMC statement. The Fed’s intentions are clearer than they’ve been in quite some time. The pace of hikes will slow, but only because it has to. The destination for rates is higher than previously expected, and markets are keen to go with it.
Friday’s jobs report did nothing to change the higher terminal rate narrative. Indeed, swaps priced a peak policy rate of 5.25% in June following the release of October payrolls.
There may be some one off Florida hurricane effects in leisure and hospitality jobs. A nephew lost his at a hotel because it’s not there any more.
Yeah for sure. And I almost wrote that, but then I deleted it at the last minute because BLS said this: “Hurricane Ian had no discernible effect on the national employment and unemployment data for October.”
Of course that’s not very specific, but… who knows.
How does the economy add that many jobs, the participation rate drop, but the unemployment rate rises? I know it is two different surveys, but one of them in for revisions.
Some of it is noise. The Oct ’22 MOM changes in HH survey are not statistically significant. Some of the industry-level MOM changes in Est survey are similarly not stat sig. I look at the monthly results as probabilities rather than accounting numbers.
“The household survey and establishment survey both produce sample-based estimates of
employment, and both have strengths and limitations. The establishment survey employment series
has a smaller margin of error on the measurement of month-to-month change than the household
survey because of its much larger sample size. An over-the-month employment change of about
100,000 is statistically significant in the establishment survey, while the threshold for a statistically
significant change in the household survey is about 500,000. However, the household survey has a
more expansive scope than the establishment survey because it includes self-employed workers
whose businesses are unincorporated, unpaid family workers, agricultural workers, and private
household workers, who are excluded by the establishment survey. The household survey also
provides estimates of employment for demographic groups”
I wonder to what extent monthly or even bi-weekly tax reporting is, or could be, used to augment survey-based economic data.
I noticed that too. It’s a good demonstration of how much noise there is amidst the signal.
I wonder how much larger the underground economy plays a role in this? My own personal experience, (building a large off grid cabin), I have noticed labourers and vendors eager to accept cash and requesting it. My builder currently has a couple guys on his crew off the books, and I’ve doled out tens of thousands in cash for labor, deliveries, and equipment. Electricians, plumbers are all doing the same. Anecdotally, it seems this segment of the economy is MUCH larger than typical. If you can collect unemployment insurance and handouts and work for 30 or 40 dollars cash, your doing pretty well.
No idea if its enough to distort the statistics and explain some of the disparities.