U.S. employers increased their pace of hiring in October, with declining COVID-19 infections and demand for workers amid widespread shortages helping bolster labor market activity.
The Labor Department released its October jobs report Friday morning. Here were the main metrics from the report, compared to consensus estimates compiled by Bloomberg:
Change in non-farm payrolls, October: +531,000 vs. +450,000 expected, +194,000 in September
Unemployment rate: 4.6% vs. 4.7% expected, 4.8% in September
Average hourly earnings, month-over-month: 0.4% vs. 0.4% expected, 0.6% in September
Average hourly earnings, year-over-year: 4.9%. vs. 4.9% expected, 4.6% in September
Non-farm payrolls posted their biggest jump in a single month since July. Job growth for the past two months was also upwardly revised. The Labor Department said Friday that September payrolls increased by 312,000, up from the disappointing 194,000 previously reported. And employers in August brought back 483,000 jobs, versus the 366,000 posted in the prior print.
“Our economy is starting to work for more Americans. Thanks to the economic plan we put through in Congress earlier this year and a successful vaccine deployment, America continues to add jobs at a record pace. In this historically strong recovery, unemployment has fallen again today,” President Joe Biden said during a press conference on Friday. “Our economy is on the move.”
Though payrolls have grown in every month so far in 2021, the economy remains more than 4 million jobs short of its pre-pandemic levels following plunges in employment between March and April of 2020. And the civilian labor force was still down by nearly 3 million individuals compared to February 2020 as of October.
Hiring was expected to pick up in a broad range of industries for October, but leisure and hospitality employers saw an especially pronounced boost as concerns over the Delta variant receded and enabled more service employees to return to work. These industries added back 164,000 jobs in October, or nearly double the 88,000 brought back in September. Professional and business services payrolls also jumped by 100,000, and education and health services roles rose by 64,000 in the private sector. Payroll growth slowed, however, in each of retail trade and transportation and warehousing in October compared to September, with ongoing supply chain shortages and labor scarcities hitting these industries especially hard.
In the goods-producing sector, manufacturing jobs rose by 60,000 to come in double the consensus estimate. This also accelerated from the 31,000 payrolls brought back in this industry in September. Durable goods payrolls specifically rose by 41,000 durable goods payrolls while jobs in motor vehicles and parts increased by nearly 28,000, after this industry group shed jobs on net a month earlier.
While job growth has struggled to keep pace with employer demand in recent months, the October report hinted at the start of some improvement on labor scarcities. Job openings came in at a near-all-time high in August — the latest month for which data is available — while the quits rate soared by a record. And companies have been widely citing labor shortages in third-quarter earnings reports. Mentions of "labor" on earnings calls have skyrocketed by 320% over last year, according to data from Bank of America.
"My largest concern right now — outside of inflationary pressures — is ultimately what happens with this labor supply shortage, because the labor supply shortage feeds into the supply chain issues we're seeing," Kevin Mahn, Hennion & Walsh chief investment officer, told Yahoo Finance Live on Thursday. "Everyone is forecasting a record holiday shopping season, but there will be delays in shipping. I'm not concerned with consumers' demand for products."
Other economists offered similar concerns around labor scarcities.
"On balance, we look for a substantial rebound in the pace of non-farm hiring in October, with gradual improvement in the unemployment rate and sustained strength in earnings growth," wrote Sam Bullard, chief economist for Wells Fargo, in a note ahead of Friday's report. "While positive, employment growth remains constrained by the supply side, and there is little evidence that suggests material improvement is near."
"Indeed, recent strike activity and vaccine mandates have been challenging factors on the supply front and suggest that labor market improvement will be gradual in coming months," he added.
Still, the labor data heading into Friday's report were upbeat. ADP reported Wednesday that private payrolls jumped by a better-than-expected 571,000 in October, whereas just 400,000 were expected. New weekly unemployment claims came in at 269,000, or their lowest level since March 2020, and had also broken below the psychologically important 300,000 level in the middle of October during the Labor Department's survey week for the monthly jobs report.
The labor market data is also important in helping inform the Federal Reserve's moves on monetary policy. The central bank has signaled it is looking for more progress on bringing sidelined workers back into the labor force before adjusting the rate of its tapering program or considering a hike on interest rates.
"There is still ground to cover to reach maximum employment both in terms of employment and in terms of participation," Federal Reserve Chair Jerome Powell said during his latest post-FOMC meeting press conference on Wednesday. He added that it was "within the realm of possibility" that the economy achieved maximum employment by the second half of next year, as measured by a broad range of metrics.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter