US labour market picks up in October with 531,000 jobs added

After two months of disappointing gains, the pace of US jobs creation accelerated in October, but shortages of labour and raw materials are still weighing on the economy.

Shortages of workers have dragged on the nation's economic recovery because jobs are only created when someone is hired [File: David Zalubowski/AP]

After two lacklustre months of gains, the United States labour market recovery picked up steam in October, as COVID-19 infections eased. But the pace of hiring was still less than the monthly average this year, as shortages of workers and raw materials continue to weigh on business activity.

The world’s largest economy added 531,000 jobs last month, the US Department of Labor said on Friday. That marked a sharp acceleration from September’s revised 312,000 payrolls number but was still below this year’s monthly average of 582,000 jobs created.

The unemployment rate in October edged down to 4.6 percent.

A number of factors were likely working in the jobs market’s favour in October.

Infections of the highly contagious Delta variant of COVID-19 started to subside last month. October also marked the first full month since the expiration of federal unemployment benefits in many states, which some politicians blamed for keeping workers on the sidelines.

Shortages of workers have dragged on the nation’s economic recovery because jobs are only created when someone is hired.

In August, a record 4.3 million Americans quit their jobs, while the number of openings hovered at a near-record 10.4 million.

With competition for workers heating up, employers have sweetened job offers with signing bonuses, fatter paycheques, and better benefits.

That trend was reflected in average hourly earnings, which jumped 4.9 percent in October from the same period a year ago.

October’s wage gains marked an extension of a trend that took hold in the third quarter, when the employment cost index, which measures wages, salaries, and benefits rose 1.3 percent – the biggest jump on records dating back 20 years.

But even the recent healthy pay bumps have not kept American workers ahead of soaring inflation.  US consumer prices increased 5.4 percent in September compared with the same period a year earlier. Increased costs for food and shelter – especially rents – drove more than half of those gains.

Lots of job openings, too few job seekers

Worker shortages have baffled many economists, because the labour market is still 4.2 million jobs short of where it stood in February 2020 – right before the pandemic struck.

This week, Federal Reserve chief Jerome Powell said the economy had recovered enough to start dialling back the Fed’s bond purchases – a key stimulus measure – but that jobs creation and labour force participation had not yet recovered enough to warrant raising interest rates. Higher interest rates cool inflation – and economic growth.

In October, the number of people either working or actively looking for a job – a metric known as the labour force participation rate – was unchanged at 61.6 percent. That metric has been stuck in a narrow range of 61.4 percent to 61.7 percent since June last year.

While the Fed wants to see more labour market healing before pulling the trigger on interest rates, a growing number of economists believe that some workers swept up in last year’s pandemic unemployment wave may never return to the workforce.

“For now, Fed officials are emphasising the shortfall in employment as evidence that the economy is still far from their long-run goals, with officials still arguing that participation rates will rebound as virus fears and caregiving burdens ease,” said Micheal Pearce, senior US economist at Capital Economics in a note to clients on Friday. “But with the labour force showing no acceleration even as [COVID-19] case numbers drop back, we’re increasingly convinced that the fall in participation since the beginning of the pandemic will prove permanent.”

Job growth was widespread in October, with the leisure and hospitality sector, professional and business services, manufacturing and transportation and warehousing all showing notable gains.

But leisure and hospitality – which added 164,000 jobs in October – is still 1.4 million jobs short of pre-pandemic levels.

Manufacturing – where shortages or raw materials, especially semiconductors, have weighed heavily – added 60,000 jobs in October. The sector is still 270,000 jobs shy of recapturing its pre-pandemic strength.

Source: Al Jazeera

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