The October employment report was stronger than predicted, with a 638,000 rise in nonfarm payrolls and a full percentage point decline in the unemployment rate, suggesting the economy continues to improve despite the rise in the number of COVID-19 cases.
And while the gains beat expectations, they still leave the nation short of pre-pandemic levels.
The October gain in payrolls follows an upwardly revised 672,000 rise in September, first reported as 661,000, and topped expectations for a 600,000 gain by economists polled by IFR Markets.
The unemployment rate dropped to 6.9% in October from 7.9% a month earlier. Economists expected a 7.6% pace. The labor participation rate rose to 61.7% in October from 61.4% in September. Average weekly hours held at 34.8, despite a 0.3-point rise to 40.5 in manufacturing hours.
Earnings per hour ticked up 0.1% to $29.50 after being flat in September.
The report “is very welcome news, as it indicates continued expansion despite rapidly growing case counts in the COVID-19 pandemic and the possibility of further shutdowns being needed in the coming months,” said Beth Akers, Manhattan Institute senior fellow and former Council of Economic Advisors economist. “However, the level of employment still remains significantly below where we were in February.”
To get to pre-pandemic levels, she said, would require 10 million more jobs. “At the current pace, we won’t see that happen for several months.” With winter coming and the possibility that rising cases will lead to “further limitations,” the recent slowdown in economic growth, Akers said, “is worrisome.”
The drop in the unemployment rate came despite a rise in labor force participation, noted Fitch Ratings Chief Economist Brian Coulton. “This is further evidence that the economy has continued to expand in the fourth quarter to date, despite the surge in the virus.”
But the long-term “impact of the coronavirus shock is starting to become clearer though with the rise in long-term (27 weeks and over) unemployment to 32% of the total," he said.
And while the report offered many positives, Bryce Doty, senior vice president and senior portfolio manager at Sit Fixed Income Advisors, LLC, warned, “without further stimulus from Congress and record breaking daily cases of COVID-19, the ‘better-than-expected’ economic data days may be over until a vaccine becomes widely distributed.”
With the number of cases climbing, he said, “jobs growth will likely slow significantly over the next couple of months as people once again become more hesitant to be out in public and segments of the economy are forced to effectively shut down again.”
While there could be “a pause in economic growth in the near term,” Doty said, “we still expect to see a very strong rebound in 2021.”
“A vaccine will surely become available sometime next year,” National Association of Realtors Chief Economist Lawrence Yun said, “which will then propel the economy into high gear.”
Consumers, when they feel safe, will flock to restaurants, sporting events and tourist locations, “as many people unleash savings accumulated during the pandemic months,” he said.
"Looking ahead, as more virus restrictions are likely to be re-introduced, the contact-intensive service sector employment might be at risk," according to Christian Scherrmann, U.S. Economist at DWS Group. "Other areas are likely to build up some resilience as people and businesses adjust to the virus."
In other data released Friday, wholesale inventories grew 0.4% in September after a revised 0.5% rise in August, first reported as a 0.4% gain, while wholesale sales climbed 0.1%, following a 1.2% jump a month earlier.
Economists expected inventories to dip 0.1% in the month.
