US Unemployment Rate Drops to 6.9%, Beating Expectations
The U.S. economy added 638,000 jobs in October, and the unemployment rate fell a full percentage point to 6.9%, beating economists’ expectations but underscoring the slow pace of the labor market recovery.
While the 638,000 increase in nonfarm payrolls was the smallest in the six months that the job market has been in rebound mode, expectations had been for an even smaller gain of roughly 500,000 to 600,000 jobs and an unemployment rate of 7.6%-7.7%. Private employers added 906,000 jobs, but this was offset by a loss of 268,000 government jobs, including 147,000 temporary Census Bureau workers, the Bureau of Labor Statistics said Friday.
- The U.S. unemployment rate fell to 6.9% in October from 7.9% in September.
- The economy added 638,000 jobs in October, the smallest number in six months, but still more than economists had expected amid a protracted labor market recovery.
- The leisure and hospitality sectors contributed the most to the increase in payrolls, offset by declines in government jobs, including temporary Census workers.
- An upswing in COVID-19 cases and lack of new federal stimulus money could exacerbate the economic headwinds this winter.
“I think overall it was a pretty solid report,” said Ryan Sweet, an economist who heads monetary policy research for Moody’s Analytics. “The most encouraging thing was the big drop of the unemployment rate. We are now south of 7%.”
Payrolls have steadily increased since May, but the unemployment rate is still twice what it was before the COVID-19 outbreak and the country has yet to replace about 10 million of the 22 million jobs lost in March and April, when businesses were shut down to curb the spread of the coronavirus. New surges in coronavirus cases and the prospect that federal lawmakers could fail to agree on another pandemic relief package threaten the vulnerable economic recovery, analysts say.
A number of industries had notable job gains, though the private sector remains far from its pre-pandemic state. The largest increase came in the leisure and hospitality industry, which added 271,000 jobs. Professional and business services sectors added 208,000 jobs, retailers added 103,700, and construction gained 84,000. Payrolls in health care and social assistance fields increased by 79,000, transportation and warehousing added 63,200 jobs, and manufacturing rose by 38,000.
But economists are wary, too. One worrying statistic is the accelerating pace of long-term unemployment. About 3.56 million people in October had been out of work for 27 weeks or more, 1.15 million more than in September. That increase exceeds September’s gain, when 781,000 more people fell into the category of long-term unemployed.
Two federal programs supporting these long-term unemployed workers are set to expire at the end of December: one that extended the 26 weeks of unemployment available in most states by another 13 weeks, and another that provides assistance to otherwise ineligible gig workers and freelancers.
“It is clear that more pain is on the horizon for these workers and their families,” Elise Gould, senior economist at the Economic Policy Institute, a progressive think tank, wrote in a research note Friday.
What’s more, the leisure and hospitality industry may not fare as well as the weather gets colder, according to Sweet, the Moody’s economist. Outdoor dining will become less attractive and if virus cases continue to increase, restaurants may lay off workers again, he said.
“By all indications, this winter is going to be pretty rough,” Sweet said.
A breakdown of the unemployment rate among racial groups showed communities of color continued to be harder hit than White populations, despite declines across all major categories. Unemployment for Black and African-Americans dropped from 12.1% to 10.8%, but was the only group still in the double digits nine months into the pandemic. Among White workers, by contrast, the unemployment rate dropped from 7% to 6%.
Taken together, indicators in the report were “positive and concerning at the same time,” Oxford Economics, an U.K.-based research firm said in a statement Friday, echoing concerns from Federal Reserve Chairman Jerome Powell Thursday about the uncertain trajectory of COVID-19 cases and the lack of a new relief package.
“With policy gridlock likely in the wake of the US election, our focus has shifted back to economic fundamentals,” Oxford wrote. “Real-time data is quite sobering in that regard, with demand being restrained by rising Covid-19 infections and slower employment gains proving insufficient to offset lapsing fiscal aid.”
U.S. Bureau of Labor Statistics. "Employment Situation Summary." Accessed Nov. 6, 2020.
U.S. Bureau of Labor Statistics. "Table A-12. Unemployed Persons by Duration of Unemployment." Accessed Nov. 6, 2020.
Economic Policy Institute. "October Jobs Report. Next President Inherits a Devastated Economy With Millions Out of Work." Accessed Nov. 6, 2020.