Workers at the Stellantis Detroit assembly plant, which produces the new 2021 Grand Cherokee L, a new three-row SUV.
Michael Wayland | NBC Finance Channel
The broadly strong hiring in October indicates that the economy is emerging from the Covid-related downturn in the third quarter, and the fourth quarter may grow faster than expected.
The number of employed people increased by 531,000 that month, Growth has been achieved in many areas such as manufacturing, hospitality, professional and business services. The unemployment rate fell to 4.6%. The August and September revisions to previous months’ data also added 235,000 jobs.
Diane Swonk, chief economist at Grant Thornton, said: “As the delta wave weakens, we are re-accelerating, and given the correction, we have passed the storm.” “It suppresses spending because people worry about it. It spread during the delta wave, but it did not destroy potential employment, and now we are starting to recover again.”
The economy slowed in the third quarter due to supply chain disruptions and Covid hindering activities. GDP grew by only 2%. Swonk had expected a 5% growth rate in the fourth quarter, but now she says it may be even higher.
“These numbers may be stronger. There is no doubt that we will end with a high profile,” she said.
Economists had previously expected 450,000 jobs to be created in October, up from 312,000 after the revision in September. Some disappointments, including the reduction of nearly 65,000 education jobs in local and state governments. Labor participation also did not achieve the expected benefits, which remained unchanged at 61.6%.
But overall, economists believe that the report is positive. “These numbers are great. The private sector is taking over from the public sector,” Swank said.
She added: “Education losses do reflect the school’s inability to attract faculty and staff and respond to the retirement tsunami.” “Wages in the public sector have not risen like the private sector. They cannot compete. They really need to raise wages. These low-paying jobs are now underway. Compete with Amazon and Walmart.”
Barclays chief US economist Michael Gabon said that the employment report showed that the economy was back on track after slowing growth in the third quarter. “We will not see the situation in the first half of this year, but our economic growth rate is not 2%,” he said.
Wages continue to rise sharply, which is the latest sign that inflationary pressures have not abated. Average hourly wage increases have risen again, up 0.4% month-on-month, or 4.9% in the past 12 months.
Although the wage sector is very hot and employment growth is strong, economists say that the report has not changed the Fed’s dynamics. However, strong employment growth in a few months may cause the central bank to re-evaluate its timetable for reducing its bond plan.
The Federal Reserve announced on Wednesday that it will begin to reduce the size of bond purchases and end its $120 billion monthly plan by the middle of next year. Swank predicts that once the plan ends, the Fed will begin to raise interest rates. She said that if job growth remains strong, the central bank may re-evaluate its timetable at its December meeting.
Inflation is also a concern of the Fed. Economists say that worsening inflation prospects may also cause policymakers to act faster to terminate bond purchases and begin to fight higher prices with higher interest rates.
Stephen Stanley, chief economist at Amherst Pierpont, pointed out that the Fed may be forced to adjust its timing. “More reports of this kind will bring the economy closer to full employment. This report is an important step towards achieving full employment. [Federal Open Market Committee] Need to accelerate the pace of reduction early next year, and eventually have to raise interest rates earlier than policymakers currently expect,” he wrote, adding that he expects the Fed to start raising interest rates in June.
Economists say that the fact that employment growth is widespread is positive for the reopening of the economy.
Professional and business services added 100,000 jobs, while manufacturing was also strong, adding 60,000. Transport and storage workers increased by 54,400, and retail employment increased by 35,300. Construction jobs increased by 44,000.
Employment in the leisure and hospitality industry increased by 164,000 people, and now by 2021 it has increased by 2.4 million people. However, compared with February 2020, the industry still lost 1.4 million jobs, or 8.2%.