The United States jobs market continues to power ahead, slowing less than expected last month, and signalling that US consumers will continue to spend, spend, spend while growing the economy.
The US Department of Labor reported on Friday that the economy added 128,000 jobs in October – more than sufficient to absorb the estimated 100,000 new entrants into the labour force.
The headline was even more impressive given the drag from a 40-day labour strike at General Motors Co’s US factories, which ended last Friday. The strike was reflected in auto manufacturing, which shed 42,000 jobs in October. But strip that number out of the equation, and total manufacturing jobs rose last month.
Employment gains for August and September were revised upward by 95,000, bringing average monthly job creation per month this year up to 167,000 – a strong number given that the US economic expansion is now in its 11th year.
The unemployment rate ticked slightly upward to 3.6 percent last month, from September’s 3.5 percent rate, which was the lowest since 1969.
The closely watched monthly jobs report followed data from earlier this week showing that the US economy slowed from July through September, as uncertainty surrounding the US-China trade war exacerbated a slump in business investment.
But the US economy also received a widely anticipated stimulus injection on Wednesday when Federal Reserve policymakers lowered borrowing costs for the third time this year. Fed officials did, however, signal they are hitting pause on the current cycle of interest rate cuts.
“The strength of this report, together with the news earlier this week of a slightly stronger-than-expected 1.9 percent annualized gain in third-quarter GDP, would seem to support the Fed’s shift to a more neutral policy stance,” Capital Economics senior US economist Michael Pearce observed in a note to clients.
Though the US-China trade war continues to inject uncertainty into business decisions – slowing investment, disrupting supply chains and contributing to a slowdown in global growth – the US economy continues to be buoyed by healthy consumer spending.
Americans received a moderate bump in pay last month, with average hourly earnings increasing three percent in October over the previous year.
As long as Americans are working and getting pay rises, consumer spending – which accounts for roughly two-thirds of US economic activity – is likely to continue to prop up growth.
Indeed, it’s solid consumer spending that offset weak business investment in the third quarter, limiting the slowdown in US economic output to 1.9 percent on an annualised basis.