Insights and Perspective

 

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October Jobs Report Shows Goods Producing Industries Picking up Steam

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for October 2020 on Friday, November 6th.  The results mark eight months since the Covid-19 economic lockdown and six months since the labor market recovery began.  The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market.  The CES reports that employment in October 2020 increased by 638,000.  The unemployment rate fell to 6.9%.  On balance, the results indicate a labor market in which job creation is still making gigantic gains but at diminishing rates from its peak in June.  As of the end of October, the U.S. remains 10 million jobs lower than its February level. 

The results show a potentially different trajectory forming between goods-producing industries and service-providing industries during the pandemic.  Job creation among the goods-producing industries (Mining & Logging, Construction, and Manufacturing) has actually picked up steam recently with two consecutive months of accelerated job creation (green bar chart), whereas the bulk of overall U.S. jobs in the service-providing industries mirror the softening national trend (purple bar chart).

The large job market gains came despite a contraction in the number of public employees in October.  In fact, it was the only industry to decline significantly during the month as seen in the chart below.  The public sector job loss was widespread but especially concentrated in the expiration of temporary federal Census jobs and fewer state government jobs in education.  The Leisure & Hospitality industry saw the largest expansion of employment.

   

The upbeat October performance of Leisure & Hospitality is partly a result of how dramatically the sector collapsed in March and April and the long road ahead to recoup that job loss.  The bottom line in the graph below illustrates the severity of the pandemic effects on Leisure & Hospitality compared to other industries.  Its employment remains 21% below February, more than twice the remaining percentage of any other major sector.

The good news is that even with a lower number of newly created jobs, the U-3 unemployment rate fell last month from 7.9% to 6.9% while the labor force participation rate saw its largest increase since June.  The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one.  The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job.  This measure of unemployment also declined last month to 12.1%.  The rapid decline in the U-3 unemployment rate suggests that many who work as contractors or in the gig economy who do not count in the CES employment report are also returning to their jobs.  

While strong growth is expected for November, the U.S. job market will have to contend with an upsurge in Covid-19 cases.  Additionally, the outcome of the presidential election has crystalized, but control of the Senate will not ultimately be decided until the Georgia runoff election on January 5, 2021.  This may give some employers pause as the pandemic and political conditions take shape over the next two months.  



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