October jobs report: Economy added 638,000 jobs as unemployment rate fell to 6.9%

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U.S. employers brought back more jobs than expected in October and the unemployment rate improved by a greater than anticipated margin. Still, improvements in both metrics have decelerated considerably from earlier this year during the initial stages of recovery during the pandemic period.

The Department of Labor released its monthly non-farm payrolls report Friday at 8:30 a.m. ET. Here were the main results from the report, compared to consensus estimates compiled by Bloomberg:

  • Non-farm payrolls: +638,000 vs. +580,000 expected and a revised +672,000 in September

  • Unemployment rate: 6.9% vs. 7.6% expected and 7.9% in September

  • Average hourly earnings, month-over-month: 0.1% vs. 0.2% expected and 0.1% in September

  • Average hourly earnings, year-over-year: 4.5% vs. 4.5% expected and a revised 4.6% in September

Friday’s jobs report also saw revisions to the last couple months’ worth of payrolls. August employment was upwardly revised to see a gain of 4,000 jobs to 1.493 million, and the change for September was revised up by 11,000 to 672,000.

U.S. stock futures, which had been trading sharply lower earlier during the pre-market session, cut some of their declines after the release of the better-than-expected jobs report.

Leisure and hospitality industries contributed a significant portion of jobs to October’s overall rise in payrolls, as the areas hardest hit earlier on during the pandemic continued to recover. Employment in these industries rose by 271,000, though this sum was a step down from the 406,000 jobs added back in September. Elsewhere within the service sector, professional and business services jobs rose by 208,000, increasing significantly from the 122,000 brought on during the previous month. Retail trade jobs also increased by more than 103,000.

Utilities industries were the only area in the private sector to see net job losses during October. Government employment, however, slid by 268,000, with 147,000 of these due to losses from temporary 2020 Census workers.

“The 638,000 rise in non-farm payrolls in October is stronger than it looks as it included a 147,000 drop in temporary Census employment and, alongside the big fall in the unemployment rate, it suggests that the labor market recovery still has plenty of momentum,” Andrew Hunter, senior U.S. economist for Capital Economics, said in a note Friday morning. Excluding the decline in government jobs, private payrolls rose by 906,000 last month following a jump of 892,000 in September.

“The slowdown in hiring in leisure and hospitality might be an early sign that virus concerns were starting to weigh on the sector but, at 271,000 last month, hiring remains much stronger than it was back in August,” Hunter added. “In any case, that was offset by larger gains in retail, construction and professional & business services payrolls.”