The latest monthly payrolls report showed that jobs increased the most in eight months for October. The data underlined the overall acceleration in job growth following the temporary setback in September due to Hurricane Florence.
Wage growth was also seen rising sharply marking the biggest jump in over nine and a half years. The data indicated that further tightening in the U.S. labor markets could encourage the Fed to continue with its rate hike plans.
The closely watched jobs report showed that the U.S. unemployment rate held steady at 3.7% which is a 49-year low. The data showed that over 700,000 people entered the workforce indicating the underlying confidence in the U.S. labor market and the economy in general.
Sustained strength in the U.S. labor market is expected to ease fears about the economy’s health. This comes amid setbacks from the housing market and stalling business spending. The U.S. President Donald Trump cheered the strong jobs report on Friday. The news comes ahead of this week’s mid-term elections which could decide which party will control the U.S. Congress.
Official data released by the U.S. Department of Labor showed that nonfarm payrolls increased 250,000 during October. Employment in the leisure and hospitality sectors bounced back after the sectors were hit due to the Hurricane Florence the month before. The regions affected included North and South Carolina.
Significant gains were seen in other sectors including the manufacturing, construction and professional and business services. Data for September was however revised down to show a lower print of 118,000 jobs instead of the previous release of 134,000.
Economists had forecast that the U.S. economy would add 190,000 jobs during the month while predicting that the U.S. unemployment rate would remain unchanged at 3.7%.
The labor department said that Hurricane Michael which hits parts of Florida in mid-October did not have any significant effects on the national employment estimates for October.
The brightest spot in the jobs report released on Friday came from the wage data. Reports showed that average hourly earnings rose by five cents or 0.2% on the month in October. This was in line with estimates and was slightly lower than September’s increase of 0.3%.
However, on an annualized basis, wage growth rose 3.1% on the year. This was the most significant increase since April 2009. In September, the wage growth registered an annual increase of 2.8%.
The number of hours worked also increased during October.
The report indicated that the U.S. economy was on a steady pace with wage inflation at the right level. The data is expected to cement expectations of a December rate hike.
The increase in wage growth is seen to increase the view that inflation will hover around the Fed’s 2.0% inflation target for a while. Recent data included the personal consumption expenditure which after excluding food and energy prices were registered at 2.0%.
The PCE remains at 2.0% for the past five months.
The Federal Reserve Board will be meeting this week for its monetary policy. However, no changes are expected to the interest rates. Investors will be focusing on the forward guidance from the Fed as eyes turn to the monetary policy decision in December.