Total nonfarm employment in America rose by 638K payrolls in October, according to a report out this morning from the Bureau of Labor Statistics. That was well above than the consensus forecast even with a headwind from roughly 150K temporary census workers being let go. Further, the August and September figures were revised higher by a net 15K payrolls, and the official unemployment rate (U-3) fell for the 6th consecutive month to a recovery low of 6.9 percent. The job gains were seen across most sectors, and similar data from ADP also released this week confirmed that employment growth has broadened recently, with firms of all sizes now accounting for roughly equal shares of monthly job growth. Small- (1-49 employees) and medium-sized (50-499 employees) businesses in particular have seen their job creation shares rise markedly in recent months, although in terms of total employment there is still a lot of ground left to be recouped before a full recovery is achieved.
Shifting the focus to worker compensation, average hourly earnings in October rose at an annual rate of 4.5 percent. Some may see such a large gain and fear that employers will start to pass on the extra expense to customers (inflation) but it is again worth reiterating that one should not read too heavily into the average hourly earnings figures because this particular data point continues to be distorted by the compositional shift in the labor market unique to this crisis, i.e. job losses have been concentrated among lower-wage workers. Further, another Labor Department report released this week that focuses on broader employment cost trends showed that U.S. workers’ compensation growth has eased recently when the mix of jobs is kept static. This is actually a good sign that inflation is not going to rise rapidly anytime soon like the more popular average hourly earnings figures would imply under normal economic conditions. Muted cost pressures also enable businesses to boost worker compensation beyond just wages, and surprisingly tight labor markets are providing an impetus to do so. Moreover, employer matches of retirement plan contributions are already on the mend, as evidenced by new Ascensus data which showed that 14.1 percent of employers have restarted their match after halting this benefit earlier in the crisis.
Sources: Econoday, U.S. DoL, ADP, Ascensus, FRBSL