Workers enjoyed their best pay raises in seven years last month as employers added 161,000 jobs, the government said in the last major snapshot of a slow but durable economy before Americans choose a new president next week.
Friday’s report sketched a picture of a resilient job market that likely keeps the Federal Reserve on track to raise interest rates when it meets next month. Yet the economy remains pocketed by weaknesses that have left many feeling left behind on the eve of Election Day. Job gains have been steady, but pay raises have only recently become widespread. And millions of Americans are working part time but would prefer full-time work.
In October, the unemployment rate dipped to 4.9 percent from 5 percent, and the government said employers added more jobs in August and September than it had previously estimated.
An alternative gauge of joblessness that counts not only the officially unemployed but also the part-timers who’d prefer full-time work and people who have stopped looking for jobs, fell to 9.5 percent. That’s the lowest point since 2008. Still, it is higher than is typical in a healthy economy.
Average hourly pay took a big step up in October, rising 10 cents an hour to an average of $25.92. That is 2.8 percent higher than a year ago and is the sharpest 12-month rise in seven years.
“If you wanted to show that the economy is still getting better for the typical voter, this report gives you what you needed,” said Jed Kolko, chief economist with job site Indeed.
The pickup in pay follows a substantial increase last year in earnings for the typical household. The economy appears to be finally delivering widespread raises after years of sluggish pay gains.
Friday’s report said that employers added 44,000 more jobs in August and September combined than it had earlier estimated. That put recent hiring in line with this year’s solid if less-than-robust pace. In September, it had appeared that hiring was slowing.
Fewer teenagers worked or were looking for work last month. That trend reduced the proportion of Americans in the workforce, which is defined as people who either have a job or are actively seeking one.
But Americans in their prime working years – ages 25 through 54 – extended a recent trend of returning to work, perhaps drawn by rising pay. More than 78 percent of people in that age bracket now have jobs, the highest proportion since November 2008, in the midst of the Great Recession. Still, that’s down from 80 percent before the downturn.
Despite last month’s progress, the economy is growing at the slowest pace of any in a recovery since World War II. Growth picked up to a 2.9 percent annual rate in the July-September quarter, the government has estimated, much faster than the 1.1 percent pace for the first half of the year.
But most analysts foresee only modest expansion in the October-December quarter, leaving growth at an anemic rate of about 1.8 percent for all of 2016.
Hiring in October was led by professional and business services, a category that includes mostly higher-paying jobs in engineering, accounting and information technology. Those companies added 43,000 jobs, followed by health-care providers, which gained 39,100.
Yet many companies are shedding workers. Manufacturers cut jobs last month, as did retailers despite October being the month where stores usually ramp up for holiday shopping. Both are factors that could weigh on economic growth this year.
“It’s not a uniformly positive report,” said Jason Schenker, president of Prestige Economics. “There is some patchiness to it.”
Consumers – the U.S. economy’s primary fuel – are showing some staying power, even though their spending slowed in the July-September period. Consumer spending did rise at a robust pace in September alone.
Much of that spending was on higher-priced items, including cars and homes. Auto sales are running close to last year’s record high of more than 17 million. And while home sales have leveled off this year, they have done so at a nearly healthy level of 5.5 million.
Businesses, though, have been cutting their spending on machinery, computers and other equipment. They have reduced such spending for the past four quarters – the longest such stretch since the recession officially ended in mid-2009.