The U.S. economy added 638,000 nonfarm jobs in October and the unemployment rate fell a full percentage from the month before, down to 6.9%, the Department of Labor announced Friday.
“These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it,” the department said. “In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.”
Some good news: The results point to a stronger-than-expected economy in October. “Progress in the U.S. labor market is holding up as household savings help fuel spending and business investment rebounds, putting the economy in better shape than many analysts expected just six months ago,” Bloomberg’s Katia Dmitrieva wrote.
Economist Tim Duy noted that the labor force participation rate rose in October, another sign that the economy continues to strengthen. Although Congress cut off a firehose of fiscal support in the form of enhanced unemployment benefits three months ago, “the labor market doesn’t seem to notice,” Duy said, suggesting that demand will continue to grow, even without additional federal help.
Some bad news: Other experts were less optimistic, finding signs of weakness despite the solid topline numbers. “Today's jobs report shows that our recovery is losing momentum,” wrote Ernie Tedeschi of the research firm Evercore ISI. “Every month since July has seen successively slower growth, and slower growth raises the risk that we get knocked down by adverse circumstances.”
Bloomberg’s Dmitrieva pointed out the big increase in the number of long-term unemployed, which increased by more than a million to 3.56 million. About one third of the roughly 11 million unemployed workers in the U.S. have been out of work for more than six months, and their number is growing rapidly.
And the sheer number of unemployed workers is still overwhelming. Economist Heidi Shierholz of the Economic Policy Institute noted that the economy is still roughly 10 million jobs shy of the employment level in February, before the pandemic took hold. About 1.3 million of those lost jobs are in state and local governments, mostly in education.
A long road back: Economist Jason Furman – who argues that a more “realistic unemployment rate” that takes into account classification errors and changes in the labor force participation rate would register 8.4% in October – said Friday that the latest report “is consistent with a ‘partial bounce back’ in the labor market, as the unemployment rate falls quickly at first, followed by a ‘slog’ where the unemployment rate slowly falls but remains at an elevated level for a prolonged period.” The bounce back could take a long time, Furman said, especially as the coronavirus continues to depress economic activity for the foreseeable future.