BOOM! Nonfarm payrolls up 271,000; jobs rate at 5%

Job growth surged in October, rebounding from a late-summer slowdown that raised concerns about whether global slowness was infecting the U.S.

The Bureau of Labor Statistics reported Friday that nonfarm payrolls grew 271,000 for the month, a sharp jump from weak August and September numbers. The headline unemployment rate declined to 5.0 percent.

A broader measure of unemployment that includes those who have stopped looking as well as those working part-time for economic reasons declined to 9.8 percent, the first time it’s been below 10 percent since May 2008.

Perhaps more important than the headline number was the growth in average hourly earnings, which jumped 9 cents an hour, representing a monthly gain of 0.6 percent and an annualized increase of 2.5 percent. The average work week remained at 34.5 hours.

“We can check off a number of good-news boxes with this report. It’s hard to find any bad-news boxes to check off,” said Mark Hamrick, senior economic analyst at Bankrate.com. “This is a report that should prompt more Americans to truly give thanks later this month. Maybe they can even add in an extra side-dish with their Thanksgiving meal.”

The labor force participation rate held at a generational low of 62.4 percent, though the decline in the total labor force slowed a bit. There were 97,000 fewer Americans counted as not in the labor force, a number that nonetheless remains near record highs at 94.5 million.

The Federal Reserve watches the monthly number closely for clues about both the strength of job creation and inflationary pressures, particularly from wage growth. The U.S. central bank has been saber-rattling for months regarding interest rate hikes but has yet to pull the trigger amid uneven economic data.

In recent days, Fed officials have insisted that December is on the table as a possible liftoff point for the first funds rate hike in nine years. Friday’s nonfarm payrolls report should add to the momentum for a hike. Heading into the payrolls report, traders were pricing in a 58 percent chance of a hike next month, and that surged to 72 percent following the payroll report release.

Stock market traders were less enthusiastic; futures, which had been flat heading into the report, turned slightly negative afterwards. Bond yields rose, with the benchmark 10-year note rising past 2.3 percent and the five-year leaping to near 1.74 percent. The U.S. dollar gained 1.4 percent against the euro as currency traders began pricing in higher rates.

“There’s a growing sentiment of let’s get it done already,” Hamrick said. “From the standpoint of a story coming together that could be very consistent with a rate hike, we got a big collection of data in that regard this morning.”

Economists polled by Reuters expected the nonfarm payrolls report to show 180,000 new jobs added in October, with the unemployment rate to hold steady at 5.1 percent. That compares to the September number of 137,000, which was revised down from 142,000. August’s number got pushed up from 136,000 to 153,000.

Professional and business services led sector gains with 78,000 new jobs. Administrative and support services added the most of the group with 46,000 jobs. Health care grew by 45,000 workers, retail added 44,000 and restaurants and bars increased by 42,000.

Construction also added 31,000 workers, though the mining sector lost 5,000 jobs. Government payrolls grew by 3,000.

The jobs skewed toward full-time, with 185,000 new positions there, while there were another 214,000 new part-time workers. Unemployment duration, however, increased, rising from 26.3 weeks in September to 28 weeks in October. Those unemployed for 27 weeks or more grew by 38,000 to 2.14 million.

Payrolls have increased an average 230,000 per month over the past year, though that has declined to 187,000 over the past three months.

Unemployment for teenagers fell to 15.9 percent, compared to 18.7 percent a year ago.

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