U.S. Payroll Growth Slows, But Unemployment Rate Falls Sharply

• Private sector hiring picks up.

• Earnings growth remains subdued.

• Jobless rate declines to seven-month low.

Nonfarm payroll employment increased 638,000 during October (-6.0% y/y) after rising 672,000 in September, revised from 661,000. August employment improved 1.493 million, revised from 1.489 million. Job growth has been positive for six consecutive months, following sharp declines in March and April. A 588,000 employment increase had been expected in the Action Economics Forecast Survey. The estimates amongst 24 forecasters had ranged from 400,000 to 900,000. Without the loss of 148,000 Census takers, payroll employment rose 786,000 (-6.0% y/y) following a 713,000 September increase.

Average hourly earnings improved 0.1% (4.5% y/y) last month after holding steady in September, revised down from 0.1%. A 0.2% gain in earnings had been expected.

The unemployment rate fell to 6.9% from 7.9%. A decline to 7.0% had been expected. Employment in the household survey surged 2.243 million after rising 275,000 in September while the labor force rose 724,000 after falling 695,000 in September. The overall jobless rate, including those who were marginally attached or working part-time for economic reasons, declined to 12.1% from 12.8%.

From the payroll survey, the 638,000 increase in jobs reflected a 38,000 rise in factory sector employment which followed a 60,000 increase in September. Construction sector employment rose 84,000, the largest increase in four months. Mining & logging sector employment improved 1,000.

In the private service sector, employment rose 783,000 as the number of leisure & hospitality jobs increased 271,000 (-19.7% y/y). Professional & business services employment gained 208,000 (-4.8% y/y) including a 108,700 (-11.2% y/y) increase in temporary hiring, the largest increase in three months. Trade, transportation and utilities jobs rose 172,000 (-3.5% y/y) reflecting a 103,700 increase (-3.0% y/y) in the number of jobs in retail trade. Health care & social services employment improved 79,000 (-3.7% y/y) after rising 118,000. Financial services employment rose 31,000 (-0.9% y/y).

Government sector employment declined 268,000 (-4.7% y/y). Federal government employment fell 138,000 (+5.3% y/y) with the exit of Census workers. State government employment declined 65,000 (-6.0% y/y) after falling 79,000 in September. Local government employment fell 65,000 (-6.2% y/y) following a 108,000 decline.

Average hourly earnings eased 0.1% last month. Construction sector pay rose 0.2% (2.8% y/y) but this was more than offset by a 0.2% fall (+3.2% y/y) in factory sector earnings. A 0.2% increase (4.9% y/y) in private service sector earnings was led by a 2.5% increase (5.9% y/y) in information services pay. Financial service sector earnings rose 1.1% (6.8% y/y) while leisure & hospitality earning gained 0.2% (2.4% y/y), the weakest increase in three months. Trade, transportation & utilities earnings eased 0.2% (+4.3% y/y) as retail earnings fell 0.7% (+6.6% y/y).

Hours-worked in the private sector held steady at 34.8 as mining & logging sector hours eased to 44.1, down from the 46.2 average last year. Construction sector hours held steady m/m at 38.8, but that was below the averages of the last few years. Factory sector hours surged to 40.5, up from 38.0 in April. Overtime hours in this sector jumped as well to 3.2 from 2.1 six months earlier. Private service sector hours surged to 33.8 and matched the record high set in May. (The series dates back to 2006.) Utilities hours rose to 42.0 while financial sector hours surged to 37.8 and matched its record in October 2018. Information sector hours reached 36.7, a six-year high, while professional & business service hours reached a record 36.6. Education & health hours also matched a record 33.5 but leisure & hospitality eased to a still high 26.0.

From the household survey, the decline in the unemployment rate to 6.9% during October occurred as the labor force participation rate rose m/m to 61.7%. It remained down, however, from 63.4% just before the recession began. The teenage participation rate eased slightly from a seven-month high to 36.1 but for those aged 20-24, it surged to 71.0%, up from a cycle low of 64.5% six months earlier. For workers aged 25-54, the rate edged higher m/m to 81.2% but remained down from the January high of 83.1%. For men aged 25-54, the rate rose slightly to 87.9% and remained down from 89.3% in February. For women of that age, the rate rose slightly to 74.6% but remained well below its February record high of 77.0%. For workers aged 55 & over, the participation rate fell to 38.7%.

The employment/population ratio for all workers improved m/m to 57.4% in October, up from April's low of 51.3%. It remained, however, sharply lower than January's high of 61.2%. The average duration of unemployment rose to 21.2 weeks, up from 6.1 weeks in April.

The teenage unemployment rate fell sharply to 13.9% from 15.9%. It remained below the record 31.9% in April but stayed much higher than February's 11.0%. The rate for workers aged 20-24 fell to 10.8%, down from the April record of 25.7%. For workers aged 25-54, the rate declined m/m to 6.4%, down from the 12.8% April high. For those over 55, the jobless rate declined to 5.4% and was below the record 13.6% in April.

By educational attainment, unemployment of workers without a high school diploma fell sharply to 9.8%, down from 21.2% in April. High school graduates without any college were 8.1% unemployed last month, down from April's high of 17.3% but higher than 3.6% in February. Those with some college but no degree were 6.5% unemployed, down sharply from the 15.0% April peak but still up from December's near-record low of 2.7%. College graduates experienced a lower 4.2% unemployment rate in October, though it remained significantly higher than its 1.9% low in February.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.