U.S. Jobs Surge by 165,000 in October, Unemployment Rate Drops to 4.1%

Total employment increased by 84,000 in August and September… In the past three months, an average of 137,000 people increased, and hourly wages increased by 0.4% compared to the previous month... Involuntary part-time work is increasing

The US employment report for October showed that job growth was stronger than expected. This is a result that alleviates concerns about a slowdown in employment, but wages are also rising faster than expected, so to judge the direction of future interest rates, price trends must also be examined.

According to the employment report released by the U.S. Department of Labor's Bureau of Labor Statistics (BLS) on the 6th (local time), non-farm employment in October increased by 165,000 from the previous month on a seasonally adjusted basis. The number is 100,000 more than the 65,000 predicted by experts compiled by Reuters. The unemployment rate fell by 0.1 percentage points from 4.2% in September to 4.1%.

Employment also increased over the past two months... Service industry leads the growth

In addition to October employment, the figures for the previous two months were also revised upward. The increase in employment in August was revised from 133,000 to 186,000, and in September from 29,000 to 60,000. Combining the two months, there are 84,000 more people than previously announced.

Reflecting this, the average monthly employment increase from August to October was 137,000. Employment in September was less sluggish than initially reported, and the rate of increase increased again in October.

Employment growth was led by the private service industry. In October, jobs in the private sector increased by 159,000 and in the government sector by 6,000. Among the private sector, the number of people in the service industry increased by 144,000.

By industry, the number of people increased by 70,000 in the professional and business services industry, by 42,000 in the health and medical services industry, and by approximately 25,000 in the transportation and warehousing industry. Manufacturing employment also increased by 19,000. On the other hand, the leisure and hospitality industry decreased by 13,000 people and the construction industry decreased by 3,000, leaving differences by industry.

Labor market participation increases... Involuntary part-time work also increases

The economic activity participation rate in October was 61.9% and the employment rate was 59.3%, each up 0.1 percentage points from the previous month. The economic activity participation rate is the ratio of the employed and unemployed among the surveyed population, and the employment rate is the proportion of the employed. In the United States, both indicators are based on the population aged 16 and older, excluding active-duty military personnel and institutional residents.

The direction of the indicators has improved, with the participation rate and employment rate increasing and the unemployment rate decreasing. However, the BLS evaluated that the extent of change in all three indicators was not large compared to the previous month.

According to a household survey targeting households, the number of employed people increased by 463,000 and the economically active population increased by 421,000. The increase in the number of employed people was greater than the increase in the economically active population, so the number of unemployed people decreased by 41,000.

The household survey counts the number of employed people, and the business survey counts the number of jobs in the non-agricultural sector. The employment growth figures of the two surveys may differ due to differences in survey subjects and methods.

Not all indicators have improved. The number of people who want to work full-time but work part-time because their working hours have been reduced or because they cannot find a full-time job is 4.84 million, an increase of 339,000 in one month. This means that although the number of jobs has increased, the number of workers who do not receive sufficient working hours has also increased.

Wages also rise faster than expected... Pay attention to the 10-day price index

The average hourly wage for private non-farm sector workers was $38, up 14 cents, or 0.4%, from the previous month. The increase rate compared to the same month last year was 3.1%. It exceeded market expectations of 0.3% from the previous month and 2.9% from the previous year as reported by Reuters. The average weekly working hours were 34.4 hours, the same as the previous month.

The reason wage flow is attracting attention is because it is related to the Federal Reserve's interest rate decision. On the 28th of last month, the Federal Reserve maintained the base interest rate target range at 3.75-4.00% per annum, but evaluated that the inflation rate was still high. In the vote at that time, two committee members argued for a 0.25% point increase.

Stronger-than-expected employment can be interpreted as a factor relieving the burden of a slowdown in employment when the Federal Reserve considers raising interest rates. However, it is difficult to conclude that the labor market is overheated or that interest rates will rise further based on just one month's wage increase rate. We must also look at the increase in involuntary part-time work and the employment gap by industry.

The next indicator to check is the October Consumer Price Index (CPI), which will be announced on the 10th. While employment growth has expanded, whether the price rise will subside is expected to be a key variable in determining the direction of interest rates in the future.