U.S. job creation fell short of expectations in October, even as the labor market continues to gain strength in 2014.
Employment grew by 214,000 in the month, according to the Bureau of Labor Statistics’ jobs report released Friday, and the unemployment rate ticked down to 5.8 percent from 5.9 percent in September. The job gains missed the roughly 240,000 number expected by Wall Street economists.
Revisions to the past two months’ surveys of businesses revealed that job growth had also been stronger than previously realized, with 31,000 more jobs added.
Despite the disappointing headline number, Friday’s report suggests that the U.S. labor market recovery has continued to improve throughout the year amid signs of faltering economic growth overseas and high volatility in U.S. markets.
With the unemployment rate falling further into the five percentage point range, it appears that the Federal Reserve’s expectations that the labor market is tightening are being fulfilled, a development that will influence officials’ decisions in the months ahead about when to raise short-term interest rates from zero.
Over the past three months, monthly job creation has averaged 224,000, a figure that rises to just under 230,000 for the year. That is well above the 194,000 average for 2013, which in turn was the highest rate since the financial crisis.
October’s payroll employment gains came along with a 416,000 increase in the labor force and a slight uptick in the labor force participation rate to 62.8 percent. The labor force participation rate has fallen steeply since the financial crisis, and hit its lowest level since 1978 in September at 62.7 percent.
Economists at the Federal Reserve and elsewhere have looked into the possibility that the large number of people who fell out of the labor force during the recession represent “hidden” unemployment, little different from the workers counted in the official unemployment rate except that they gave up on finding work. Nevertheless, the labor force participation rate has remained little changed since October 2013, even as demographic changes are expected to drive down the rate for years to come.
The news regarding wages was less encouraging. Hourly earnings increased by 3 cents to $24.57 in October, according to the BLS’ household survey. Over the course of the year, earnings are up just 2 percent, right in line with the meager income gains throughout the recession and just enough to outpace inflation. Federal Reserve Chairwoman Janet Yellen and other Fed members are watching income growth closely for signs that the labor market is tightening.
A broad measure of underemployment that takes into account workers forced into part-time jobs or only marginally attached to the labor force, the U-6 unemployment rate, fell from 11.8 to 11.5 percent, a large one-month move. Over the past year, the U-6 rate is down by more than 2 percentage points.
The strongest payroll growth for the month took place in restaurants and retail, two relatively low-paying sectors that have led the recovery. The healthcare sector also added 25,000 jobs, continuing a long streak of gains, and manufacturing also showed an upward trend with 15,000 jobs.
There were a total of 5,000 new government jobs in October, with relatively strong growth in state and local governments offset by 3,000 lost jobs in the Postal Service.
This story was first published at 8:36 a.m. and has been updated.
