U.S. Payroll Growth Weakens in October; Earnings Growth Slows and Unemployment Rate Edges Higher

Job market strength has cooled. Nonfarm payrolls increased 150,000 during October (1.9% y/y) after rising 297,000 in September, revised from 336,000, and 165,000 in August, revised from 227,000. The October reading was the weakest since June. During the first ten months of the year, payrolls rose an average 239,000 per month after an average 399,000 in 2022. Expectations had been for a 182,000 rise in the Action Economics Forecast Survey.

Average hourly earnings edged 0.2% higher in October following 0.3% gains in both of the prior two months. Each were revised from 0.2%. The 4.1% y/y earnings increase remains well below a high of 5.9% y/y in March 2022 and the lowest since June 2021. A 0.3% October increase had been expected.

The unemployment rate, measured in the household survey, edged up to 3.9% in October from 3.8% in both September and August. It remained the highest rate since January 2022 and elevated from its 3.4% April low. Expectations had been for a 3.8% rate. Household employment declined 348,000 after rising 86,000 in September. The labor force fell 201,000 following a 90,000 rise. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, rose to 7.2% from 7.0% in September and has been trending higher since its 6.5% December 2022 low.

In the establishment survey, private-sector employment increased 99,000 (1.8% y/y) after increasing 246,000 in September, revised from 263,000. Factory sector jobs fell 35,000 (0.0% y/y) after a 14,000 September rise. Construction sector employment rose 23,000 (2.7% y/y) after a 13,000 September increase.

Private service-producing employment improved 110,000 (1.9% y/y) after improving 218,000 in September. Industry performance remained mixed. Trade, transportation & utilities employment fell 1,000 (+0.4% y/y) following a 43,00 September rise while leisure & hospitality payrolls rose 19,000 (3.5% y/y) after a 74,000 increase. Education & health care jobs gained 89,000 (4.2% y/y) while professional & business jobs rose a fairly steady 15,000 (1.1% y/y), including a 6,600 increase (-5.0% y/y) in temporary help employment. Financial sector employment eased 2,000 (+0.7% y/y) but information sector payrolls fell 9,000 (-2.8% y/y), down for the sixth straight month.

Government sector payrolls rose 51,000 (2.8% y/y) for the third straight month. Local government payrolls rose 38,000 (2.5% y/y) and state government jobs increased 10,000 (3.4% y/y) as they did in September. Federal government jobs gained 3,000 (2.8% y/y).

The 0.2% gain in private-sector average hourly earnings reflected a 0.2% rise (5.0% y/y) in goods-producing earnings. Construction sector earnings rose 0.5% (5.0% y/y) and factory sector earnings improved 0.1% (4.8 % y/y). In the private services sector, earnings rose 0.2%. The 3.9% y/y increase remained well below its high of 6.1% in March 2022. Financial activities earnings rose minimally (5.1% y/y). Trade, transportation & utilities sector pay held steady (4.4% y/y) last month. Professional & business sector earnings improved 0.3% (4.5% y/y). Private education and health services pay rose 0.2% (3.0% y/y) for a second consecutive month. Leisure & hospitality earnings increased 0.3% and 4.5% y/y, still well below the 14.0% y/y peak in December 2021. Information sector pay also remained unchanged (1.4% y/y) last month.

The length of the average workweek slipped to 34.3 hours in October and remained down from a peak of 35.0 hours in January 2021. The workweek in the goods-producing sector eased to 39.8 hours. The construction sector workweek held at 39.1 hours, while the factory sector workweek slipped to 40.0 hours after being 40.1 hours for six months. The average workweek in the private service sector eased to 33.2 hours after being at 33.3 hours for seven consecutive months and remained below the 34.0 hour high early in 2021. Financial sector hours slipped to 37.3 hours but information services hours edged higher to 36.4 hours. Professional & business service hours fell to 36.3 hours, down from a January 2021 high of 36.9, while leisure & hospitality hours held at 25.5 hours in October.

The private sector’s aggregate weekly hours index, a key indicator of production and income, fell 0.3% (+0.9% y/y) following two straight months of 0.3% increase.

In the household survey, the higher 3.9% unemployment rate in October was accompanied by a lower 62.7% labor force participation rate. It had been trending higher from a low of 61.3% in January 2021. The participation rate for teenagers rose to 37.9%, the highest level since June 2009. For workers aged 20-24, the rate fell to 70.8% and compared to a high of 72.0% in February & March. For workers aged 25-54, the rate fell to 83.3% in October, but was increased from 81.7% two years earlier. For individuals 55 and over, the rate fell to 38.6% in October and remained well below its 40.5% peak in July 2019.

The employment/population ratio for all workers fell to 60.2% after three months at 60.4%. It remained below its reading of 61.1% in February 2020 just prior to the pandemic.

The average duration of unemployment rose minimally to 21.6 weeks in October from 21.5 weeks in the prior month, up from the 19.3-week low in February of this year. The median duration of unemployment fell, however, to 8.9 weeks from 9.2 weeks in September. It remained below the 19.9-week high in June 2021.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.