U.S. job creation picked up slightly last month, but the unemployment rate edged higher and the three-month average of monthly job gains remained basically flat -- and far below the level needed to dent U.S. unemployment.
The Labor Department said Friday employers added 171,000 people to their payrolls last month. Not only was the October monthly job growth better than the 125,000 job gains economists were expecting, but revisions were also up. September payrolls were revised to a gain of 148,000 from an initially reported 114,000, and August to 192,000 from 142,000.
Private companies accounted for all of the gains in October payrolls, adding 184,000 jobs during the month. Manufacturers added 13,000 jobs. Governments, meanwhile, shed 13,000 jobs.
The unemployment rate ticked up to 7.9 percent from 7.8 percent in September, but that was due to a surge of workers coming back into the workforce, which is a good sign. Only people who have recently looked for a job can count as unemployed.
However, after factoring revisions to the previous two months jobs data, the trailing three-month average of monthly jobs gains is 170,333 new jobs -- almost exactly in line with the October figure of 171,000. Economists believe that more than 200,000 jobs need to be added to make a dent in unemployment.
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Despite the modesty of U.S. job creation in October, or the previous two months, the Labor Department's report is unlikely to change the trajectory of the presidential race.
“We doubt that October's employment report is either strong enough or weak enough to have any marked impact on next week's presidential election,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a note. “The bottom line is that the labor market remains unusually weak, but whether it is weak enough to prevent Obama getting re-elected is anyone's guess."
The civilian labor force rose by 578,000 to 155.6 million in October, and the labor force participation rate edged up to 63.8 percent, from 63.6 percent in September. Total employment rose by 410,000 over the month. The employment-population ratio was essentially unchanged at 58.8 percent, following an increase of 0.4 percentage point in September.
"The latest data suggests the sharp decline in the unemployment rate last month was exaggerated but by no means a complete fluke," writes Alan Ruskin of Deutsche Bank. He points out the rise in the unemployment rate this month was mainly due to an increase in the labor force and a big 410,000 gain in the household survey.
As expected, Hurricane Sandy had no discernible effect on the employment and unemployment data for October, according to the Bureau of Labor Statistics. Household survey data collection was completed before the storm, and establishment survey data collection rates were within normal ranges nationally and for the affected areas.
The disturbing part of this report is that earnings were basically unchanged for the month. Average earnings slipped by 1 cent to $23.58 an hour, while the average workweek was unchanged for the fourth straight month, at 34.4 hours, in October. People can only spend what they earn, and over the past year, wages are up just 1.6 percent -- the lowest rate since September 1986. During the same period, however, the rate of inflation is up 2 percent.
Another bit of disappointment comes from the average length of unemployment, which ticked up to 40.2 weeks from 39.8, the highest since December 2011. Economists warn that long-term unemployment could be transformed in the next few years into structural unemployment, meaning that the problem is not just too few jobs and too many job seekers, but a large group of workers who no longer match employers’ needs or are no longer considered employable.
The wider U6 unemployment rate – which includes people working part-time for economic reasons -- actually fell to 14.6 percent last month, from 14.7 percent. Meanwhile, the number of people working part-time for economic reasons dropped back sharply in October. Temporary employment has been broadly unchanged over the past three months, which is not a good sign.