US job gains in October beat forecasts

A busker performing on a New York street. Non-farm payrolls increased by 271,000 last month, exceeding all estimates in a Bloomberg survey of economists. The median forecast was for a 185,000 advance.
A busker performing on a New York street. Non-farm payrolls increased by 271,000 last month, exceeding all estimates in a Bloomberg survey of economists. The median forecast was for a 185,000 advance.PHOTO: AGENCE FRANCE-PRESSE

Wage growth picks up and jobless rate falls - making rate hike next month a possibility

•WASHINGTON • Employment in the United States last month surged by the most this year, wage growth accelerated and the jobless rate fell to 5 per cent.

The good numbers are just the signs of labour market durability Federal Reserve policymakers are looking for as they consider an interest rate hike next month.

Non-farm payrolls increased by 271,000 last month, the largest rise since December 2014, the Labour Department said yesterday.

The additions exceeded all estimates in a Bloomberg survey of economists. The median forecast was for a 185,000 advance.

Average hourly earnings climbed from a year earlier by the most since July 2009.

In the wake of sluggish job gains the prior two months, October's advance allays concerns that an abrupt hiring slowdown would hinder the expansion's progress as economies overseas strive to gain traction.

Further improvement in the job market is a precondition for Fed officials, who last month held out the possibility of a December interest rate increase.

"Employment growth remains strong," Mr Jim O'Sullivan, chief US economist at High Frequency Economics in Valhalla, New York, said before the report. "The message is: The recent slowing was exaggerated. The higher the payrolls numbers, the greater the support for the Fed to move in December."

He added that based on other indicators, "job growth is strong".

The report also showed diminishing labour-market slack. The number of Americans working part-time because of a weak economy fell to 5.7 million in October, the lowest since June 2008.

The underemployment rate - which includes part-time workers who would prefer a full-time position and people who want to work but have given up looking - fell to 9.8 per cent, the lowest since May 2008.

The participation rate, which shows the share of working-age people in the labour force, held at 62.4 per cent.

Fed officials said last month that they would consider a rate increase at their next gathering, and Fed chair Janet Yellen this week echoed the view by saying December was a "live possibility".

One of the central bank's preconditions for lift-off is "some further improvement" in the labour market. It next meets on Dec 15-16, and an increase in the benchmark rate would be the first since 2006. The interest rate has been near zero since December 2008.

"This is without question the sort of report that will continue to keep the hike conversation for December alive and well," said Mr Tom Porcelli, chief US economist of RBC Capital Markets.

American manufacturing has taken a hit with softening sales in overseas markets, a stronger dollar and oil sector weakness depressing demand. Services, which account for about 90 per cent of the economy, are relatively shielded and faring better.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on November 07, 2015, with the headline 'US job gains in October beat forecasts'. Print Edition | Subscribe