A woman walks through Times Square in New York in the US. Picture: 123RF/KIRKIKIS
A woman walks through Times Square in New York in the US. Picture: 123RF/KIRKIKIS

The US labour market got back on track in October with a larger-than-forecast and broad-based payrolls gain, indicating greater progress filling millions of vacancies as the effects of the Covid-19 Delta variant faded.

Nonfarm payrolls increased 531,000 in October after large upward revisions to the prior two months, a labour department report showed Friday. The unemployment rate fell to 4.6% while the labour force participation rate was unchanged.

The median estimate in a Bloomberg survey of economists called for a 450,000 payrolls gain and for the jobless rate to fall to 4.7%. The dollar held on to gains after the data, while the yield on the 10-year treasury note fluctuated. US stock-index futures rose.

The data paints a sunnier picture of the job market than previously thought, with easing Covid-19 cases and higher wages helping employers fill near-record openings. At the same time, the labour-force participation rate has barely budged in recent months as millions of Americans remain on the sidelines, and the loss of federal expanded unemployment benefits for 7.5-million people may have helped boost payrolls.

The figures help validate the US Federal Reserve’s decision this week to begin scaling back its pandemic-era pace of bond-buying aimed at keeping borrowing costs ultra-low. They may also give a boost to President Joe Biden as his approval ratings sag and he struggles to get more than $2-trillion in tax and spending proposals through Congress.

Payroll gains in October were led by a 164,000 increase in leisure and hospitality. Professional and business services, transportation and warehousing, and manufacturing also posted significant increases. 

Factory employment jumped 60,000 in October, the most since June of last year and largely reflecting a surge in carmakers’ payrolls. Government employment fell.

Average hourly earnings rose 4.9% in October from a year ago, the most since February, though inflation is taking a bigger bite out of workers’ pay. The increase underscores workers’ ability to demand higher pay amid an ongoing labour shortage. 

Higher wages could mean that more businesses raise prices to protect margins as the costs of labour, materials and transportation climb, stoking inflation. Prices have increased by the most in three decades on a year-on-year basis, driven by supply chain bottlenecks and shortages.

“We have high inflation and we have to balance that with what’s going on in the employment market,” Fed chair Jerome Powell told reporters on Wednesday following the central bank’s policy meeting. “It’s a complicated situation.”

October’s gain leaves payrolls 4.2-million below their pre-pandemic level. The pace of hiring in the coming months risks being restrained by new Covid-19 flare-ups. Recent data show hospitalisation increasing in 13 states, which could signal another virus wave. Healthcare payrolls climbed in October by the most this year, led by home healthcare and nursing.

The labour department’s report showed average workweek fell to 34.7 hours in October from 34.8 hours a month earlier.

The stagnant labour force participation rate — the number of Americans either employed or looking for work — points to challenges with getting people back into jobs. Participation has remained near current levels since August 2020, due in part to increased retirements and parents leaving jobs for child care purposes.

“There is still ground to cover to reach maximum employment both in terms of employment and in terms of participation,” Powell said Wednesday.

Unemployment rates for white and Hispanic Americans dropped in October, while the black and Asian rates were unchanged.

Bloomberg News. More stories like this are available on bloomberg.com

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