161K New Jobs In October

The Bureau of Labor Statistics (BLS) has released its monthly non-farm payroll numbers, and the headline has come slightly below expectations: 161K new jobs were created in October, under the 170-175K range analysts had anticipated. The unemployment rate ticked down back to 4.9%.

As always, there’s plenty to unpack in this report. Average wages rose 0.4% and +2.8% year over year, which looks to be something the Fed will pay close attention to when it decides on interest rate policy mid-next month. Higher wages lead to higher inflation, which is what the Fed is looking for in order to curb excesses in the domestic economy.

Revisions upward were also significant: August jobs numbers went up from 167K to 176K, and September rose even further, from 156K to 191K. Private sector hiring reached 142K for October, and Government gained 19K jobs. The labor force participation rate of 62.8% remains on the low side of the historic range.

Manufacturing fell again, to -9K in the month, and Retail, usually a sector gaining jobs ahead of holiday season, was -1.1%. Hurricane Matthew-related employment resulted in 238K jobs not attended during the storm. Professional and Business Services once again led the way with 43K new jobs for the month.

Another important metric for the Fed will be the U6 — or “real” unemployment — which fell to an historically low 9.5%. Considering how many baby boomers have recently retired, this figure marks real strength in the U.S. labor market.

Odds should now even be greater that the Fed will bump up interest rates December 14th. The 10-year bond has ticked up from summer lows and now rests around 1.82%.