The nation’s unemployment rate fell to 5 percent in October, the lowest rate in seven years. The economy added 271,000 jobs last month according to the official jobs report released Friday by the Bureau of Labor Statistics (BLS). Wages increased an average of nine cents an hour after falling in September. And, the overtime hours for factory workers increased to 3.3 hours a week. The BLS revised the totals for August and September showing that 12,000 more jobs were added that previously reported.
The Stock Market began the day lower on fears that the strong jobs growth would mean the Federal Reserve will raise interest rates. Stocks closed higher at the end of trading; however stocks that are vulnerable to rising interest rates lost value whereas banking and other stocks rose in anticipation of the FED increasing interest rates. The FED has postponed rate increases pending data on whether job growth continues.
The good news is that the economy is creating jobs at the fastest pace since the Clinton administration. The bad news is that there was so much damage done by the collapse of the banking system that resulted in a global recession, an organic recovery is not possible. To put the long-term unemployed back to work, a major investment in re-building our crumbling and obsolete infrastructure is needed. These investments have been made throughout history to help recover the economy after a recession.
There is less than a zero chance that the Republican-controlled Congress will make those investments. In fact, their policies have done the opposite—cutting spending on infrastructure. It is uncertain if the new Speaker of the House, Paul Ryan, can get Republicans to pass a highway bill. And, despite passage of a two-year budget, a government shut-down could still happen if Republicans follow through their threat to add riders to appropriation bills—riders President Obama has threatened to veto. The FED is aware of this and may wait for a resolution before raising interest rates.
Despite the strong job growth, the number of unemployed persons was unchanged although over the past year the number of unemployed fell by 1.1 million. The number of long-term unemployed (unemployed for more than 27 weeks) remained high at 2.1 million or 26.8 percent of the workforce. The number of discouraged workers, those who stopped looking for work, remained at 665,000. The number of persons working part-time involuntarily dropped by 269,000 last month.
Professional and business services increased employment by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months. In October, job gains occurred in administrative and support services, computer systems design and related services, and architectural and engineering services spurred on by a strong housing market.
Health care added 45,000 jobs in October. Over the past year, health care has added 495,000 jobs. Much of this is due to the fact that 13 million more Americans now have health insurance due to Obamacare and they are able to seek medical care. Republicans however, continue to say that Obamacare is a job killer despite the data.
Employment in retail trade rose by 44,000 in October, compared with an average monthly gain of 25,000 over the prior 12 months. Some of this could be due to stores hiring in anticipation of holiday shopping. In October, clothing and accessories stores added 20,000 jobs; general merchandise stores added 11,000; and automobile dealers hired 6,000 new workers in response to strong auto sales. Food services and drinking places added 42,000 jobs in October. Over the year, the hospitality industry has added 368,000 jobs.
The construction industry added 31,000 jobs in October, after sluggish growth in recent months. Employment in nonresidential specialty trade contractors rose by 21,000. Over the past 12 months, construction has added 233,000 jobs.
Employment in mining continued to trend down in October cutting 5,000 jobs. The industry has shed 109,000 jobs since reaching a recent employment peak in December 2014. Almost all of this is due to low global oil prices that have curtailed new exploration and drilling—mostly new fracking wells. Oil prices are too low to make many fracking operations profitable.
It will be interesting to see whether consumers are optimistic about the future and spend money during the holidays on gifts and travel, or whether they hold back. If the economy continues to recover and grow, it could have implications for the 2016 elections. Stay tuned.