October Jobs Report

After a disappointing report in September, the labor market rebounded in October.  The U.S. economy created 261,000 jobs for the month of October, which came in below economists’ expectations of 313,000.  However, revisions show that the economy added 18,000 jobs for the month of September instead of the initially reported decline of 33,000 jobs.  The extends the economy’s job gain streak to a record 85 straight months.  In fact, revisions added 90,000 jobs over the August-September time frame, bringing the three-month average over 160,000 jobs created.  Furthermore, the Unemployment Rate fell to 4.1% in October, the lowest reading since December 2000.  The rate has declined from 4.8% to start the year, and this drop is due to the number of unemployed workers falling by less than the number of employed.   After leading the decline in September, the restaurant and bar industry rebounded in October as the effect of the two hurricanes dissipated, with 89,000 jobs coming back to the industry.

Wages continued to grow, albeit at a slower pace than we saw last month as low paying jobs in the restaurant industry came back online.  Wages were expected to increase 2.7% year-over-year in October, but came in at a 2.4% growth rate.  However, when factoring in total hours worked with average hourly earnings, total earnings are up over 4% over the past year which signals strong growth in consumer purchasing power.  Still, we will continue to monitor this to see if the rate of growth picks up as we head into the end of the year and the effects of both hurricanes subsides.

We see nothing in this month’s report that would derail the Federal Reserve from their plan to raise the benchmark rate next month. In fact, market expectations are now pricing in nearly a 90% probability of a rate hike when the Fed meets in December.  Therefore, we expect the Fed to maintain their steady and systematic plan to raise rates and tighten monetary policy.