Ed Dolan's Econ Blog

October Data Show Stronger Labor Market as Workers Return and Part-Time Work Falls

The October jobs figures released today by the BLS showed a stronger U.S. labor market. The unemployment rate edged up by 0.08 percentage points, just enough to raise the headline rate from 7.8 to 7.9 percent. However, a look at the underlying data showed that the uptick in the headline rate was a “good” increase of the kind that we often see  as previously discouraged workers return to a strengthening labor market.

The labor force increased by 578,000 workers in October. The number of employed persons, as measured by the household survey from which these data come, increased by 410,000. Since the increase in new jobholders was less than the increase in the labor force, the number of unemployed increased by a reported 170,000. (The numbers don’t sum because of rounding errors.) The unemployment rate is the ratio of employed persons to the labor force.

The BLS also publishes a broader measure of unemployment known as U-6. It includes discouraged workers who have given up looking because they think there are no jobs to be found, people who are working part-time but would prefer full-time work if available, and some other marginally attached workers. The number of involuntary part-time workers fell by 296,000 in October, helping to bring U-6 down from 14.7 percent to 14.6 percent.

Looking at other data from the household survey, we find that the employment-population ratio increased from 58.7 to 58.8 percent. That marks its highest level in more than three years. The labor force participation rate increased as well, from 63.6 percent to 63.8 percent. Both of these data points are further signs of a strengthening labor market.

Turning to the establishment survey, we find more evidence that the labor market has strengthened since mid-summer. The BLS reported 171,000 new nonfarm payroll jobs for October. (The number of payroll jobs added in the payroll survey differs from the increase in the number of employed reported in the household survey partly because the latter includes farm workers and self-employed persons, and partly due to differences in methodology.) More impressive still, the data for previous months were revised strongly upward. The August figure, first reported at 96,000, is revised to 192,000. Similarly, the September figure, first reported at 114,000, is revised to 148,000.

These data are consistent with the increase in GDP growth from 1.3 percent in Q2 to 2.0 percent in Q3, as reported a few days ago by the Bureau of Economic Analysis. In all of Q2, the U.S. economy added just 200,000 new payroll jobs an average of 67,000 per month. Since that time, it has added 692,000 jobs, or 173,000 per month.

Most of October’s new jobs were in the service sector. Construction gained 17,000, its third monthly increase. Manufacturing added just 13,000 jobs, not enough to claw back losses in the previous two months. The loss in manufacturing jobs is consistent with the decrease in exports reported in the Q3 GDP data. The private sector added 184,000 jobs in the month, while government at all levels lost 13,000.

Political analysts have traditionally held that data coming so close before an election have little effect on voters. That is likely to be even more true this year, given the steady increase in early voting. Still, this strong jobs report will come as a last-minute morale booster for the Obama team as they go into the last days of their get-out-the vote drive.




9 Responses to “October Data Show Stronger Labor Market as Workers Return and Part-Time Work Falls”

Ed Dolan EdDolanNovember 2nd, 2012 at 1:03 pm

I'm not usually the first to comment on my own post, but after it went live, I ran across an interesting headline from Fox News that shows a rather different spin on the data.

The headline on the Fox front page reads as follows: "VIRTUAL STANDSTILL: 171K NEW JOBS 170K NEW JOBLESS (here is the permalink to the full story, which has a slightly different headline )

Technically, the Fox headline is accurate; as explained in my post, the payroll survey shows 171k new jobs and the household survey shows a 170k increase in the number of unemployed workers. What the Fox story "forgets" to say is that the household survey also shows a 410k increase in the number of employed persons.

Ed Dolan EdDolanNovember 5th, 2012 at 10:14 am

Interesting point. I think the trend toward more service sector jobs goes back well before Obama. For example, a quick look shows that total jobs increased by 3.8 percent during the 8 years of the GW Bush presidency. That included a loss of 10.6 percent in goods-producing jobs, a gain on 7 percent in private service jobs, and a gain of 6.6 percent in government jobs. I'll try to work up a more complete presentation of these trends for a future post.

japanandeconomicsNovember 11th, 2012 at 4:18 pm

I follow the Japanese economy, and glance occasionally at OECD comparisons; manufacturing is declining and the service sector rising across the developed world. It's nothing recent.

Separately, another metric is employment to population. Because of the aging of the baby boomers looking at disaggregated data is best. And unfortunately except for a couple series FRED doesn't do it for you. So for my students I spent a bit of quality spreadsheet time; a table and detailed graph are on the link to my class WordPress blog below. The story is consistent with other data: labor markets are slowly improving in a broad-based manner. All age brackets show a rise relative to recent averages, though (as to be expected with small sample sizes) specific YoY comparisons show the occasional negative number or large positive number.

One interesting item: ratios fell for all demographics below age 60-64, but were flat or rising for 60-64, 65-69, 70-74 and 75+ throughout the Great Recession. No early retirement in these data.

Economics 398: (Un)Employment Data

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