Jobs Report Falls Short of Expectations, Wages Failing to Keep Up

About 261,000 jobs were added to the U.S. economy in October and the unemployment rate edged down to 4.1%, according to estimates released by the U.S. Bureau of Labor Statistics (BLS).

However, most of the growth was in low-paying jobs, particularly food services jobs, as people returned to work in the south Florida and greater Houston areas, according to the BLS’ monthly report.

Economists had been expecting 325,000 jobs, so the report is a miss from their perspective.

The labor force participation rate was 62.7% – close to the 63% expected.

The number of unemployed persons decreased by about 281,000 to 6.5 million.

Since January, the unemployment rate has decreased by 0.7 percentage points, and the number of unemployed persons has decreased by 1.1 million, the bureau reports.

Although the decrease in the unemployment rate brought it down to a 17-year low, wages have failed to keep up. Average hourly earnings for all employees on private non-farm payrolls, at $26.53, were little changed in October (-1 cent).

Wages, however, increased by 12 cents in September.

Over the past 12 months, average hourly earnings have increased by 63 cents, or 2.4%, according to the bureau’s estimates.

In October, average hourly earnings of private-sector production and non-supervisory employees, at $22.22, were little changed (-1 cent).

In a statement, Mark Fleming, chief economist for First American Mortgage Solutions, says “Food services and drinking places rebounded and removed most of the losses last month as people got back to work post-hurricane.”

He points out that residential construction jobs also rebounded to a level of 767,000.

“That’s an increase of 7.2 percent from September to October,” Fleming says. “Yet, the number of residential construction jobs is only a modest 2.3 percent above the level a year ago.

“Home building, particularly housing starts, faces a number of headwinds at the moment, including access to buildable lots with the appropriate infrastructure, rising regulatory costs, increased building material costs and labor constraints,” Fleming says. “Home building still requires manual labor as a key input into the production process, and productivity gains in this sector have lagged behind overall productivity improvements.

“According to data from the BLS Job Openings and Labor Turnover Survey (JOLTS) construction report, construction job openings, as a share of all construction jobs, is rising,” Fleming adds. “While the gains made this month are a positive sign, home builders would like to hire more labor, if only they could fill those openings.”

Fleming predicts that annual housing starts for October “should remain above 1.1 million units, but will likely remain well below the peak reached earlier this year.”

“Housing starts continue to face a labor shortage challenge, and the gap between household formation and home building will remain,” he says.

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