WASHINGTON D.C. — Anyone with jitters about the US economy got an unexpected surprise on Friday.
US employers added 128,000 jobs in October, the Bureau of Labor Statistics said in its monthly jobs report.
Meanwhile, the unemployment rate rose slightly to 3.6%, but it was for a good reason: 325,000 Americans started looking for work.
Overall, the report was far stronger than expected, beating economists’ forecasts for a gain in 89,000 jobs. A 40-day GM strike, which took 46,000 autoworkers out of the workforce, was expected to serve as a bigger drag on the job market.
While the October report did show that US manufacturers lost 36,000 jobs last month, BLS Commissioner William Beach noted the decline largely reflected strike activity. If it hadn’t been for the strike, the report would have shown a gain in factory jobs, said Marvin Loh, senior market strategist at State Street.
Now that the strike is over, those jobs should bounce back in November, Gus Faucher, PNC chief economist, wrote in a note to clients.
“With good job gains and solid wage growth, households’ incomes are increasing, which will boost consumer spending through the end of 2019 and into 2020,” Faucher said.
Better than expected
Average hourly earnings increased 0.2% in October, a slightly slower pace than expected, but overall, they were still up 3% from a year earlier.
Another bright spot came from strong revisions to prior data, which showed an extra 95,000 jobs were added in August and September combined.
“The current economic expansion, already the longest in US history, looks set to continue at least through the first part of next year despite the trade war drag,” Faucher said.
Consumer spending is the backbone of the US economy. The retail sector added more jobs in October, and the September number was revised up, “indicating that strength in the consumer sector is sufficient to support positive retail hiring,” Morgan Stanley economists wrote in a note.
The unemployment rate, at 3.6%, remains near a 50-year low. In October, the labor market participation rate climbed to 63.3%, its highest level since August 2013.
“Really, there is nothing here to worry about,” wrote Thomas Simons, senior money market economist at Jefferies in a note to clients. “Whatever weakness we see here this month (which is not as weak as expected to begin with) is going to be added back in with the November data.
Although the report was strong, hiring has slowed down in 2019 compared with 2018, averaging just 167,000 jobs per month versus 223,000 last year. Given that the United States is in its longest running economic expansion in history, those numbers are considered solid.
President Donald Trump called the report a “blowout” in a tweet, citing 303,000 jobs added. The White House said his number factors in 128,000 jobs added in October, plus 95,000 jobs from August and September revisions, 60,000 GM workers hit by the strike and 20,000 Census workers whose temporary jobs ended.
Economists don’t usually do the math that way, and according to the BLS, 46,000 GM workers impacted the numbers — not 60,000. Nevertheless, many economists and investors agreed the report was strong. US stocks opened at all-time highs following the report.
“American companies picked up the pace of hiring in October, suggesting the worst might be over for the economic slowdown, while the Fed’s pivot toward pausing might be appropriate,” said Sal Guatieri, senior economist at BMO.
Earlier in the week, the Federal Reserve had cut interest rates for a third month in a row in an effort to stimulate the economy. The central bank acknowledged risks facing US growth, but said the economy was broadly doing fine. The Fed also signaled that it would keep interest rates on hold for the time being.