NFP: U.S. Adds 250K vs 194K Jobs Expected In October

by Ike Obudulu Posted on November 2nd, 2018

Washington, DC, USA: Payrolls beat expectations at 250000 in October compared with the 194,000 median estimate in a survey of economists and the unemployment rate was unchanged at 3.7 percent, U.S. Bureau of Labor Statistics figures showed Friday.

Household Survey Data

The unemployment rate remained at 3.7 percent in October, and the number of unemployed persons was little changed at 6.1 million. Over the year, the unemployment rate and the number of unemployed persons declined by 0.4 percentage point and 449,000, respectively.

Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.4 percent), teenagers (11.9 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (3.2 percent), and Hispanics (4.4 percent) showed little or no change in October.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.4 million in October and accounted for 22.5 percent of the unemployed.

The labor force participation rate increased by 0.2 percentage point to 62.9 percent in October but has shown little change over the year. The employment-population ratio edged up by 0.2 percentage point to 60.6 percent in October and has increased by 0.4 percentage point over the year.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 4.6 million in October.

These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In October, 1.5 million persons were marginally attached to the labor force, little changed from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 506,000 discouraged workers in October, about unchanged from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 984,000 persons marginally attached to the labor force in October had not searched for work for reasons such as school attendance or family
responsibilities.

Establishment Survey Data

Total nonfarm payroll employment increased by 250,000 in October, following an average monthly gain of 211,000 over the prior 12 months. In October, job growth occurred in health care, in manufacturing, in construction, and in transportation and warehousing.

Health care added 36,000 jobs in October. Within the industry, employment growth occurred in hospitals (+13,000) and in nursing and residential care facilities (+8,000). Employment in ambulatory health care services continued to trend up (+14,000). Over the past 12 months, health care employment grew by 323,000.

In October, employment in manufacturing increased by 32,000. Most of the increase occurred in durable goods manufacturing, with a gain in transportation equipment (+10,000). Manufacturing has added 296,000 jobs over the year, largely in durable goods industries.

Construction employment rose by 30,000 in October, with nearly half of the gain occurring among residential specialty trade contractors (+14,000). Over the year, construction has added 330,000 jobs.

Transportation and warehousing added 25,000 jobs in October. Within the industry, employment growth occurred in couriers and messengers (+8,000) and in warehousing and storage (+8,000). Over the year, employment in transportation and warehousing has increased by 184,000.

Employment in leisure and hospitality edged up in October (+42,000). Employment was unchanged in September, likely reflecting the impact of Hurricane Florence. The average gain for the 2 months combined (+21,000) was the same as the average monthly gain in the industry for the 12-month period prior to September.

In October, employment in professional and business services continued to trend up (+35,000). Over the year, the industry has added 516,000 jobs.

Employment in mining also continued to trend up over the month (+5,000). The industry has added 65,000 jobs over the year, with most of the gain in support activities for mining.

Employment in other major industries–including wholesale trade, retail trade, information, financial activities, and government–showed little change over the month.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in October. In manufacturing, the workweek edged down by 0.1 hour to 40.8 hours, and overtime was unchanged at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls, at 33.7 hours, was unchanged over the month. (See tables B-2 and B-7.)

In October, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $27.30. Over the year, average hourly earnings have increased by 83 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.89 in October.

The change in total nonfarm payroll employment for September was revised down from +134,000 to +118,000, and the change for August was revised up from +270,000 to +286,000. The downward revision in September offset the upward revision in August. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation
of seasonal factors.) After revisions, job gains have averaged 218,000 over the past 3 months.

Hurricane Michael

Hurricane Michael made landfall in the Florida Panhandle on October 10, 2018, during the reference periods for both the establishment and household surveys. Hurricane Michael had no discernible effect on the national employment and unemployment estimates for October, and response rates for the two surveys were within normal ranges

Market Reaction – Stocks Trend Higher On Jobs Data, Trade Optimism

Stocks are likely to move to the upside in early trading on Friday, extending the upward trend seen over the past few sessions. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 237 points.

Early buying interest may be generated in reaction to a report from the Labor Department showing stronger than expected job growth in the month of October.

The Labor Department said non-farm payroll employment surged up by 250,000 jobs in October after rising by a downwardly revised 118,000 jobs in September.

Economists had expected an increase of about 190,000 jobs compared to the addition of 134,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in October was unchanged from the previous month at 3.7 percent, its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.05 to $27.30 in October, reflecting a 3.1 percent increase compared to the same month a year ago.

Traders may also react positively to a report from Bloomberg indicating President Donald Trump has asked key U.S. officials to begin drafting potential terms of a trade deal with China.

People familiar with the matter told Bloomberg the push for a possible trade deal was prompted by Trump’s phone call with Chinese President Xi Jinping on Thursday.

In a post on Twitter, Trump said he had a “very good” conversation with Xi on trade, adding that the “discussions are moving along nicely.”

Trump reportedly asked key cabinet secretaries to have their staff draw up a potential deal to signal a ceasefire in an escalating trade conflict.

Trump and Xi are expected to meet on the sidelines of a Group of 20 summit in Buenos Aires, Argentina, beginning November 30th.

After initially showing a lack of direction, stocks moved sharply higher over the course of the trading session on Thursday. With the gains on the day, the major averages extended the strong upward move seen over the two previous sessions.

The major averages ended the day just off their highs of the session. The Dow surged up 264.98 points or 1.1 percent to 25,380.74, the Nasdaq soared 128.16 points or 1.8 percent to 7,434.06 and the S&P 500 jumped 28.63 points or 1.1 percent to 2,740.37.

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Friday. Japan’s Nikkei 225 Index shot up by 2.6 percent, while Hong Kong’s Hang Seng Index spiked by 4.2 percent.

The major European markets have also moved to the upside on the day. While the U.K.’s FTSE 100 Index has climbed by 0.7 percent, the French CAC 40 Index and the German DAX Index are jumping by 1.3 percent and 1.5 percent, respectively.

In commodities trading, crude oil futures are falling $0.27 to $63.42 a barrel after plunging $1.62 to $63.69 a barrel on Thursday. Meanwhile, after spiking $23.60 to $1,238.60 an ounce in the previous session, gold futures are sliding $4.40 to $1,234.20 an ounce.

On the currency front, the U.S. dollar is trading at 112.98 yen compared to the 112.72 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1426 compared to yesterday’s $1.1408.

Nonfarm Payroll (NFP) Report

The Nonfarm Payroll (NFP) report is released on  the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation

It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.

Economic indicators in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:

Non-Farm Employment Change

Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity

Average Hourly Earnings

The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;

Unemployment Rate

Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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