US employers added 638,000 jobs in October, as the labour market continued its slow rebound eight months from the start of the pandemic-fuelled downturn.
The latest figures from the US Bureau of Labor Statistics came in higher than economists’ forecast for a gain of 600,000 jobs. The unemployment rate dropped to 6.9 per cent, compared with 7.9 per cent a month earlier, and analysts’ average estimate of 7.7 per cent. Unemployment peaked at 14.7 per cent in April.
Although the US has recouped more than half the number of jobs that were lost early in the pandemic, a rise in new coronavirus cases in the US threatens to put the brakes on the rebound, in a sign of the economic challenges that the next US president will face.
The reopening of some businesses across most states backed strong gains last month for some of the hardest-hit sectors, particularly restaurants and bars. Employment in the leisure and hospitality sector — including food services — jumped by 271,000, and retailers added 104,000 jobs. Construction, healthcare and transportation groups also boosted hiring, while the number of government jobs fell, driven in part by the end of 147,000 temporary US census jobs.
The labour force participation rate — a measure of the total workforce — increased slightly to 61.7 per cent from 61.4 per cent, underscoring the job market’s progress last month as the unemployment rate dropped.
The October payroll report was “further evidence that the economy has continued to expand in the fourth quarter to date, despite the surge in the virus”, said Brian Coulton, chief economist at Fitch. “The lasting impact of the coronavirus shock is starting to become clearer though with the rise in long-term (27 weeks and over) unemployment to 32 per cent of the total.”
Some economists and Federal Reserve officials have warned that the recovery could stall without additional stimulus, and the possibility that lawmakers can reach a deal on a new package of economic aid remains uncertain with the likelihood of a divided government in Washington as results from Tuesday’s election are tallied.
“You look at this number today and say that’s great . . . but it is difficult to imagine we will have this type of progress through December and January,” said Padhraic Garvey, global head of debt and rates strategy at ING. “That is going to be a difficult period.”
“December is likely to be a month, whether we like it or not, where there could well be lockdowns in the US,” he warned.
Employers added an average of 1.6m workers in July and August, followed by an increase of 672,000 jobs in September.
The number of Americans actively receiving state unemployment aid fell to 7.3m as of October 24, the lowest since mid-March. There were more than 21m people in all federal and state programmes, including benefits allocated for the self-employed, for the week that ended on October 17.
While job growth has decelerated in recent months, last month’s gains bring the labour market closer to pre-pandemic levels. Non-farm payrolls have risen by more than 12m since the start of May, after 22m people were put out of work during the height of coronavirus shutdowns.
Robert Frick, corporate economist at Navy Federal Credit Union, noted that the strong October report came despite the loss of temporary jobs related to the US census. “The economy is finding new ways to do business, and is hiring back workers on furlough because of Covid-19 more quickly than expected,” he added.
“On the other hand, the pace of new hires is slowing, more workers are moving into the ranks of the long-term unemployed, and the number of permanently unemployed held steady at 3.7m.”
US government bond prices sold off sharply on Friday, sending the yield on the benchmark 10-year note higher by 0.07 percentage points for the session to 0.83 per cent.
The ultra-long 30-year note yield rose 0.09 percentage points to 1.61 per cent. Meanwhile, the dollar index slipped 0.3 per cent, and the S&P 500 was down 0.2 per cent.