by Mitch Kokai
Senior Political Analyst, John Locke Foundation
THE EMPLOYMENT REPORTfor October, released on Friday by the Bureau of Labor Statistics, showed no job gains in manufacturing and small declines in mining. But private-sector employment jumped by 268,000, way above consensus expectations, with gains on the government level adding just 3,000. The strong overall showing for October, at 271,000, was the highest this year.
The results vindicate those of us who thought that initially reported weakness in August and September was an aberration, in light of clear evidence from other key indicators that the job market was tightening, especially the plunge in unemployment insurance claims. While the October report’s upward revision to August and September was relatively small (12,000), the three-month average for August-October ran a reasonably solid 187,000.
Also significant was that growth of hourly earnings finally began to show signs of life, reflecting a tight labor market. Average hourly earnings of all employees on private nonfarm payrolls were up 2.5% in October from the same month a year earlier, a six-year high. And with price inflation running close to zero, most of those gains were real rather than nominal.
The unemployment rate ticked down to 5%, a low not seen since April 2008, when the Great Recession had just begun. The jobless rate has now exactly halved over the past six years from its October 2009 peak of 10%. Based on past patterns, it has further room to fall. In May 2007, it was at 4.4%.
The Fed has gotten solid evidence that the labor markets are on the upswing, making a rate hike close to certain in December, the first hike in nine years. While inflation probably won’t have reached the Federal Open Market Committee’s 2% objective, these masters of rationalization surely won’t have much difficulty rationalizing that one.