Jobs: What One Good Report Means

A blowout October Employment Report suggests the economy has regained momentum just in time for the holiday shopping season. Strong numbers across the board in the report sharply raises the likelihood of a Fed rate increase in December. However, one report does not necessarily mean the economy has moved to a significantly stronger growth trend. Growth is still likely to be moderate by historical standards, implying occasional periods of mixed economic reports may occur at times. These periods of mixed data will likely prompt the Fed to remain cautious during the process of policy normalization, implementing future rate hikes only at a very gradual pace.

The October Employment report showed broad strength, with the economy adding 271,000 jobs for the month; 268,000 from the private sector. Prior months were revised higher by a combined 12,000 in August and September. Increases in payrolls were broad-based, led by private services, particularly Professional & Business Services, Education & Health Care, Leisure & Hospitality, and Retailing. Wages were up 0.4 percent for the month and accelerated to a 2.5 percent rate over the past 12 months, the fastest growth since 2009. The length of the average workweek held steady at 34.5 hours. When hours are combined with payroll gains and wages, the index of aggregate hourly earnings, a proxy for take-home pay, rose 0.6 percent for October and accelerated to a 4.6 percent rise over the past 12 months. The unemployment rate fell to 5.0 percent while the participation rate was unchanged at 62.4 percent.