Joint Economic Committee

Chairman

Senator Dan Coats (IN)

Friday’s October employment report from the Bureau of Labor Statistics (BLS) registered a 161,000 gain in nonfarm payroll jobs.  Private payrolls gained 142,000 jobs.  The headline unemployment rate (U-3) decreased to 4.9 percent from last month’s 5.0 percent.  From last month, the number of employed decreased by 43,000, while the labor force decreased by 195,000 individuals.  The labor force participation rate decreased 0.1 percentage point to 62.8 percent.  Nonfarm payroll job growth for August was revised up from +167,000 to +176,000 (final estimate).  For September, it was revised up from +156,000 to +191,000 (second estimate).

 

October Jobs Report Data

Previous September Data

Revised September Data

October Forecast

October Data

Establishment Survey

 

 

 

 

Nonfarm Payrolls Change

156,000

191,000

178,000

161,000

Private Payrolls Change

167,000

188,000

170,000

142,000

Average hourly earnings (% chg.)

0.2%

0.3%

0.3%

0.4%

Household Survey

 

 

 

 

Unemployment Rate (U-3)

-

5.0%

4.9%

4.9%

“True” Unemployment Rate (U-6)

-

9.7%

-

9.5%

Labor Force Participation Rate (%)

-

62.9%

-

62.8%

        16-64 years old

-

73.2%

-

73.1%

        25-54 years old

-

81.5%

-

81.6%

Employment to Population Ratio (%)

-

59.8%

-

59.7%

Labor Force Change

-

444,000

-

-195,000

Population Growth (16+ years old)

-

237,000

-

230,000

Source: BLS, BEA, Bloomberg Econoday

LABOR TRENDS FOR WORKERS, JOB SEEKERS AND FAMILIES

The labor force participation rate remains subdued, even among prime-age workers
  • The labor force participation rate decreased 0.1 percentage point to 62.8 percent.
  • It remains significantly below the previous business cycle’s peak of 66.0 percent (December 2007)—a difference of 3.2 percentage points.
  • The rate for 25-54 year olds is 81.6 percent.  It is down 1.5 percentage points compared to the peak of the last business cycle, when it was 83.1 percent.
Specifically, labor force participation is down among Americans under 60 years old
  • When broken down into five-year age cohorts, only workers age 60 and older have seen their participation increase since the start of the recovery.
  • By comparison, workers age 59 and younger, particularly ages 16 to 19 and men ages 20 to 24, have seen their workforce participation decline significantly over the course of the recovery.
Full-time employment remains subdued as a share of total employed
  • The share of the employed that are working full-time is 1.4 percentage points below pre-recession levels, even though the number of full-time jobs finally passed its pre-recession peak in August 2015.
  • There are 3.0 million more part-time jobs compared to pre-recession levels. As a share of the employed, part-time work is up 1.4 percentage points compared to its pre-recession level.

Average monthly job growth in 2016 is below its 2012, 2013, 2014, and 2015 numbers

  • The average monthly private-sector job growth in 2016 is the lowest since 2010.
  • Over the past 12 months, nearly 2.4 million nonfarm payroll jobs were added, compared to 2.8 million jobs added over the year ending October 2015.
  • There are over 5.2 million fewer private-sector payroll jobs in this recovery than in the average post-1960 recovery lasting for one year or more.

 

Long-term unemployment remains elevated
  • It takes 71 days for the median jobless worker to find a job or leave the workforce. The average is worse—190 days.
  • As a percent of the jobless, the share of long-term unemployed (27 weeks or more) remains elevated at 25.2% compared to its pre-recession average of 14%.

THE BIGGER PICTURE

The Wall Street Journal’s survey of economists estimates that the number of new jobs needed to keep the unemployment rate unchanged is 145,000 per month.  October’s 161,000 payroll growth was just enough to pass this benchmark.  Currently, the three-month moving average for payroll jobs growth is 176,000; it is a slowdown relative to the three-month moving averages for September (206,000) and August (233,000).  Payroll growth has averaged 181,000 per month thus far in 2016, compared with an average monthly increase of 229,000 in 2015.

  • JEC estimates that over 8.1 million people are still on the sidelines.  This estimation applies the labor force participation rate that existed before the previous recession (66.0%, December 2007) to the October 2016 civilian non-institutional population (254,321,000).  This calculation implies there should be 167,852,000 individuals in the labor force; the actual number is only 159,712,000 as of October 2016.
  • The Wells Fargo Economics Group found that the modest rebound in the labor force participation rate over the past year is not due to more workers entering the work force, but rather less workers exiting.  The report suggests that full employment may already have been attained, and absent structural reforms, that the labor market is unlikely to absorb workers sidelined during this recovery.
  • The probability attached to a Fed interest rate hike of its target range from 0.25-0.50 percent to 0.50-0.75 percent in December was 59.5 percent on October 7.  As of Friday, 09:55 am ET, November 4, it was 71.5 percent.

UNDERLYING DETAILS

October’s employment report was a continuation of an extremely underwhelming recovery.

  • Hurricane Matthew most likely did not have any significant impact on the jobs number since a payroll job is recorded so long as a worker received at least one hour of pay for any day of the week falling on the 12th day of the month.  The Weather Channel reports that the storm finally moved away from the coastline on Sunday, October 9th.
  • The number of unemployed persons decreased by 152,000 to 7,787,000 from last month’s 7,939,000.  Since last year, it has decreased by 112,000 from its October 2015 number of 7,899,000.  This October, the number of persons unemployed less than 5 weeks decreased by 177,000 for the month.  There was a modest increase of 5,000 in the number of long-term unemployed (those without jobs for 27 weeks or more) from 1,974,000 last month to 1,979,000 this October.  Long-term unemployment as a share of total unemployment increased from last month’s 24.9 percent to 25.2 percent.
  • Of the 142,000 new private-sector jobs, BLS reports that all 142,000 jobs were added in the private service-providing sector while the number of jobs the private goods-producing sector was unchanged.  The government sector gained 19,000 jobs.
    • Within the private goods-producing sector, jobs gains/losses by industry were: mining and logging (-2,000), construction (+11,000), and manufacturing (-9,000), making for a net gain of 0 jobs from the sector as a whole.
    • Within the service-providing sector, jobs gains/losses by industry were: wholesale trade (+6,300), retail trade (-1,100), transportation and warehousing (+7,500), utilities (+900), information (+4,000), financial activities (+14,000), professional and business services (+43,000), education and health services (+52,000), leisure and hospitality (+10,000), other services (+6,000).
    • In October, there were 487,000 discouraged workers (persons not looking for jobs because they perceive none are available for them).  This is a decrease from October 2015’s number of 665,000 discouraged workers.
    • ADP’s National Employment Report estimates that private-sector employment increased 147,000 in October, with 165,000 jobs created in the service sector and 18,000 jobs lost in the goods-producing sector.  Professional and business jobs were up 69,000.  The financial sector added 18,000 jobs.  Trade, transportation, and utilities created 17,000 jobs.  Manufacturing lost 1,000 jobs, while construction jobs shed 15,000.  ADP’s employment numbers, though useful, are not necessarily a reliable predictor for actual payroll jobs numbers released by the BLS.

The next BLS employment situation report for initial November employment numbers and revisions to the October and September establishment survey data are scheduled for release on Friday, December 2, 2016, at 8:30 a.m. ET.