A surprisingly strong jobs report sent stock markets higher on Friday while validating the Fed’s decision to take a pause on interest-rate reductions.
Nonfarm payrolls added 128,000 jobs in October, beating the 75,000 anticipated by a consensus of analysts.
The economy racked up the gains despite a six-week General Motors strike, which resulted in tens of thousands of workers temporarily out of work, further weakening an already depressed manufacturing sector.
The Bureau of Labor Statistics also revised payroll gains for August and September, adding 95,000 jobs to the healthy increases originally reported.
“Wow, a blowout JOBS number just out,” President Trump tweeted. “This is far greater than expectations. USA ROCKS!”
The report sent the Dow Jones Industrial Average up more than 250 points — or nearly 1 percent — with the S&P 500 and Nasdaq also posting gains around 1 percent.
Much of October’s employment upswing came from the leisure and hospitality industry, which added 61,000 jobs, followed by education and health services, which saw an uptick of 39,000 jobs.
Manufacturing led the downside by shedding 36,000 workers. But even that sector would have posted a gain had it not been for the strike-related loss of 42,000 jobs in the auto industry.
“This broadly better-than-expected employment report adds a bold exclamation point to the Federal Reserve’s notion that it was probably right to stand down from its effort to reduce interest rates,” said Mark Hamrick, Bankrate.com senior economic analyst.
The Fed, which cut interest rates for the third time this year on Wednesday, signaled a hiatus to the easing cycle that began in July.
“We have to keep in mind here that we’re still in the longest period of economic expansion in US history, so a few dips here and there are certainly par for the course,” Steve Rick, Chief Economist at CUNA Mutual Group, told The Post. “Until we start seeing a more sustained month-to-month trend of weaker numbers, there’s little reason to be losing sleep over a mediocre jobs report.”
Despite the job gains, average hourly earnings rose a measly 0.2 percent in October — to $28.18 an hour. That kept the annual increase in wages at 3.0 percent, after peaking at 3.4 percent in February.
And the unemployment rate ticked up slightly from 3.5% to 3.6% in October, but remains near a five-decade low.
“The reality is skilled talent is hard to come by,” explained Becky Frankiewicz, president of North American at ManpowerGroup. “A multi-generational workforce is demanding more from their employers, and that doesn’t always mean pay.”
And while stable wages in a tight job market have economists believing inflation remains under control, CUNA’s Rick cautioned that a Goldilocks economy can’t last forever — especially when it’s vulnerable to trade tariffs and diminishing returns from the tax cut.
“Risks of higher inflation and an overheating economy are looming on the horizon,” he said. “These factors can push the economy into a recession, which I still don’t believe will come until at least the second half of 2020.”
