A solid October jobs report on Friday spotlighted the surprising durability of the U.S. economy in the face of persistent trade conflicts and a global slowdown.
The economy managed to add 128,000 jobs last month even though tens of thousands of workers were temporarily counted as unemployed because of the now-settled strike against General Motors. What’s more, the government revised up its combined estimate of job growth for August and September by a robust 95,000.
Though the unemployment rate ticked up from 3.5% to 3.6% in October, it’s still near a five-decade low.
And for a second straight month, average hourly wages rose a decent, if less than spectacular, 3% from a year ago.
The report from the Labor Department suggested that the economy has enough strength to keep expanding despite the threats from overseas, political tensions at home, a downturn in manufacturing and a chronic gap between the wealthiest Americans and everyone else.
The healthy level of hiring also makes it less likely that the Federal Reserve, which cut short-term interest rates this week for a third time this year, will do so again anytime soon.
“This was an unambiguously strong report,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
The jobs data put stock investors in a buying mood. The Dow Jones Industrial Average was up about 250 points in early-afternoon trading.
Friday’s jobs report also raised the prospect of further job growth to come. The settlement of the GM strike, which contributed to the temporary loss of 41,600 auto factory and likely other related jobs last month, seems sure to lead to a return of those jobs in coming months.
In addition, the labor force participation rate, a gauge of how many adults either have a job or looking for one, reached 63.3%, the best since 2013. That suggests that a rising number of people continue to think it’s a good time to find a job.
Besides GM, a temporary drag on hiring last month was the U.S. Census. The government let go of 20,000 short-term workers who had been helping prepare for the 2020 survey.
The economy has been expanding for more than a decade, the longest period of growth on record. But the bump from the 2018 tax cuts is fading, and an aging population and other demographic forces are slowing potential growth.
That slowdown could be worrisome for President Donald Trump, who is seeking re-election next year amid an impeachment inquiry. The economy appears unable to achieve the lasting growth of more than 3% annually that Trump had promised. Within 30 minutes of the jobs report’s release, though, the president celebrated the figures on Twitter as a “blowout,” adding that “USA ROCKS.”
Job growth so far this year has averaged 167,000 a month, down from an average of 223,000 in 2018, according to Labor Department figures. Even so, hiring remains high enough to keep the unemployment rate from rising even as overall growth has become more tepid. On Wednesday, the government estimated that the economy grew in the July-October quarter at a modest 1.9% annual rate.
The hot job market is spurring many employers to raise wages to attract and retain workers. Yet those gains may not always leave workers feeling better off as they grapple with high housing, transportation, health and education expenses.
One employer, Nona Lim, the founder and CEO of a company that supplies rice noodles and broths to grocery stores across the country, says she’s had to raise wages 20-25% above the minimum wage of $13.80 in Oakland, California, to attract workers.
“There is a lot of money in the Bay Area in tech but not necessarily in non-tech,” said Lim, 45. “It gets kind of challenging working in the Bay Area as a manufacturer. The cost of living is high. The minimum wage is high.”
Much of the fuel for overall U.S. growth has come from consumers, who drive about 70% of economic activity. Pay raises are helping some of them. In September, consumers modestly stepped up their spending, and their incomes grew fast enough to let them save more, too.
In a sign that consumer spending is helping to lead to more hiring, restaurants added 47,500 jobs last month.
But even as consumers help drive growth, business investment has become a drag on the economy. Collectively, businesses have slashed their spending on industrial machinery and other equipment, mostly because the U.S.-China trade war has made them reluctant to commit to big purchases. The tariffs between the U.S. and China, the world’s two largest economies, have also reduced U.S. exports.
Friday’s jobs report hinted at a mixed picture for the start of the holiday shopping season. Retailers added 6,100 jobs last month. But the rise of e-commerce and an increasing concentration of wealth in large U.S. metros have corresponded with the loss of more than 20,000 jobs at retailers over the past 12 months.
A slowdown in pay growth is another source of concern. Hourly average earnings had been rising at a 3.4% annual rate back in February, significantly above the 3% pace in October.
But reduced wage growth might be somewhat misleading. Employers are giving more opportunities to workers who usually start at lower wage levels, and that might have cut into the overall pay gains, said Julia Pollak, a labor economist at ZipRecuriter, an online job marketplace.
“Given the number of women, the number of Hispanics, the number of blacks, the number of young people entering the workforce,” Pollak said, “it’s quite possible that the influx of all these workers is dragging that average down.”