NEW YORK – U.S. employers added far more jobs in October, the best performance in six months, according to a government report Friday that came in well above Wall Street’s expectations.
The Department of Labor report showed a net gain of 337,000 jobs to nonfarm payrolls in the month, up from the revised 139,000 gain in September. Economists surveyed by Briefing.com were looking for a gain of 175,000.
The unemployment rate came in at 5.5 percent, which despite the big jump in jobs was up from the 5.4 percent rate in September. Economists were expecting the unemployment rate to stay at 5.4 percent. The unemployment rate fell because the Department of Labor’s household survey estimated there were 367,000 more people looking for work in October than September.
Some economists who believed the earlier low job-growth number in September had been impacted by three major hurricanes that month suggested some of the strong October growth and the upward revision was due to adjustments for the storms.
“I think this report clearly shows that we got a hurricane bounceback,” said Anthony Chan, senior economist for J.P. Morgan Fleming Asset Management. “It also puts the possibility of a Fed rate hike in December back in play.”
Impact on interest rates
While economists and investors were in strong agreement that the Fed is likely to raise rates by a quarter percentage point at its Nov. 10 meeting, many expected the central bank to take a pause in its policy of measured rate hikes at the December meeting.
But Steven Wieting, senior economist at Citigroup, said he didn’t believe that even the strong employment number would cause the Fed to raise interest rates at the December meeting, or to announce more than a quarter-point hike Wednesday.
“The Fed can leave the panic to markets. Obviously, employment alone does not explain the economy well over the last few years,” he said.”
This report sent stocks higher and bond prices sharply lower, as bond yields rose on the expectation of further interest rate hikes by the Federal Reserve. Bond yields have an impact on mortgage rates, which have fallen in recent months despite the Fed’s policy of rate hikes.
Citigroup had the job growth forecast closest to the actual results — a gain of 325,000. But even Wieting said he doesn’t see this as the start of a hiring boom, despite the upward revision in both the August and September payroll numbers coupled with the strong October report. He said that the Department of Labor’s earlier reports had underestimated the impact of the hurricanes, and other technical factors pointed to the strong October number.
“We’re not going to see all October economic reports look as good as this employment report, and next month’s employment is not likely to be another gain of 337,000,” he said.
Chan agreed that slower employment gains are ahead in coming months. He pointed out that the average work week stayed steady at 33.8 hours and that number normally climbs before a sustained period of increased hiring.
“Without an increase this month, it is hard to believe that employers are dying to hire 300,000-plus new workers each month,” he said.
Among the sectors showing strong growth was construction hiring, which gained 71,000 jobs, boosted by cleanup and reconstruction efforts in hurricane-affected areas of the Southeast.
Professional and business services also added 97,000 jobs, while retailers added a seasonally adjusted 21,000 ahead of the holiday shopping season.
Among the sectors losing ground, manufacturing employment saw a net decrease of 5,000 jobs.
Job reports showed strong growth from March through May. They have been generally weak and below forecasts since.