- Nonfarm payrolls rose by 638k in October, slightly ahead of market expectations. The unemployment rate made another sizeable drop, falling to 6.9% from 7.9% in September.
- In the payrolls data, healthy jobs gains were seen in leisure and hospitality (+271k), professional and business services (+208k), retail trade (+104k) and construction (+84k).
- However, employment in government declined (-268k), as 147k temporary census workers’ jobs ended. Job losses were also notable at the state (-65k) and local level (-65k). State and local job losses have been concentrated in education, which lost a combined 159k jobs in October.
- Unlike September, the drop in the unemployment rate was more encouraging as it came on top of a rebound in the labor force participation rate back to August’s level (61.7% in October vs. 61.4% in September). The number of unemployed people fell by 1.5 million to 11.1 million, of which 3.2 million are considered “temporarily” unemployed – down from a peak of 18.1 in April.
- In an interesting supplement to the household survey, the BLS noted that the number of people who teleworked due to the pandemic continued to fall in October, but remained high at 21.2% (vs. 22.7% in September). Also, 15.1 million people reported that they were unable to work, or worked fewer hours due to the pandemic, down slightly from September. However, 11.7% of these people received at least some pay from their employer for the hours not worked. Also, 3.6 million people who were not in the labor force were prevented from looking for work due to the pandemic (down from 4.5 million in September).
Key Implications
- Any way you slice it, October’s jobs report paints an encouraging picture of the U.S. labor market. Still, there is still a long road ahead to regain all of the 10 million jobs that have been lost since February. At the current pace it would take another 16 months to make up the losses. 78% of those job losses are in private services, and leisure and hospitality in particular – accounting for 35% of all jobs lost. And with cases on the rise once again, gains in these close contact sectors will become harder to come by.
- In the meantime, the urgency for 11 million unemployed Americans to find work is increasing as the generosity of the federal government will end soon. Expanded unemployment benefits provided by the CARES Act (an extra 13 weeks of benefits as well as expanded eligibility), which have supplemented state programs, are set to expire at the end of the year. Unless Congress acts in the lame duck session to extend these benefits, the healthy momentum in consumer spending is at risk.
