October Nonfarm Payrolls Rise 165,000, Easily Beating Consensus Estimates

According to Robert Stein, Dep. Chief Economist, and Brian S. Wesbury, Chief Economist at First Trust Portfolios, the labor market showed robust strength in October, characterized by widespread positive trends across multiple employment measures. Nonfarm payrolls increased by 165,000 during the month, exceeding the consensus forecast of 70,000. Upward revisions to August and September added a combined 84,000 positions, lifting the net two-month adjusted gain to 249,000. Private sector payrolls expanded by 159,000, driven by additions in professional and business services of 70,000, healthcare and social assistance of 55,000, and transportation and warehousing of 25,000. Manufacturing added 19,000 jobs, while government payrolls rose by 6,000.

The report notes that the headline unemployment rate edged down to 4.1% from 4.2% in September, although the economists describe this decline as largely a rounding effect given that the unrounded rate shifted slightly from 4.175% to 4.141%. Under the household survey, civilian employment rose by 463,000 as the labor force expanded by 421,000. Meanwhile, average hourly earnings rose 0.4% month-over-month and 3.1% from a year earlier. First Trust's economists suggest that because annual wage gains continue to lag overall consumer price inflation, the Federal Reserve may find justification to avoid raising short-term interest rates as aggressively as financial markets anticipate.

Stein and Wesbury also observe that private payrolls have risen by an average of 79,000 per month over the past year, which they argue counteracts broader anxieties regarding technological displacement. They note that combined employment in manufacturing and construction gained 16,000 in October and is up 196,000 year-to-date, whereas government positions have declined by 58,000 over the past year. In addition, the economists highlight supportive secondary data, noting that initial jobless claims dropped to 189,000, bringing the four-week moving average to what the authors describe as "the lowest since 1969." Third-quarter nonfarm business productivity grew at a 3.6% annual rate, while unit labor costs fell at a 0.7% rate, a shift the authors explain as wages failing to rise as quickly as production rather than an absolute decline in compensation.

Key terms

1. Nonfarm payrolls: A monthly measure compiled by the Bureau of Labor Statistics tracking the net change in U.S. workers across private businesses and government entities, excluding agricultural staff and certain nonprofit roles.

2. Unit labor costs: The total average compensation and wages paid to workers to produce one single unit of output, used by analysts to track business production expenses and potential inflationary pressure.

3. Civilian employment: An estimate derived from the government household survey that counts employed residents, including small-business owners and unincorporated self-employed individuals not captured in business payroll data.

Source: Robert Stein, CFA – Dep. Chief Economist and Brian S. Wesbury – Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.