The numbers: Companies stepped up hiring efforts in October and added a solid 531,000 jobs, but the biggest labor shortage in decades is still holding back an economic recovery and adding to the largest surge in inflation in three decades.
The increase in hiring almost doubled the number of job gains in September and exceeded Wall Street’s forecast. Economists polled by The Wall Street Journal had forecast 450,000 new jobs.
The private sector generated 604,000 new jobs last month and hiring was robust across most industries. Government employment fell.
Unemployment dipped to 4.6% from 4.8% and hit a new pandemic low. Yet the official rate underestimates the true level of unemployment by a few percentage points, economists say.
Yet the number of people who joined the labor force only rose by 104,000. That left the rate of participation at a paltry 61.6%.
The labor-force participation rate has barely budged over the past year and remains near the lowest level since the early 1970s. The economy can’t grow much faster unless more people go back to work.
Businesses have tried to attract more workers by raising pay, offering bonuses or improving benefits. Hourly wages jumped again in October and have risen 4.9% in the last 12 months, one the sharpest increases in decades.
The downside is higher wages are adding to inflation and raising the cost of living. Much the wage gains workers are reaping is being eaten up by higher prices for rent, food, gas and transportation.
U.S. stocks fell slight on Friday in premarket trading.
Big picture: A rapidly dwindling number of coronavirus cases have paved the way for the economy to speed up, but a lack of workers still poses a big roadblock. Companies can’t produce enough goods and services to keep up with demand because of persistent labor and supply shortages.
The hope is that the fading pandemic, higher pay, the reopening of schools and the end of emergency unemployment benefits will push more people back into the labor force. Some 9 million people lost jobless benefits in September.
It’s by no means guaranteed, however. A large number of people retired during the pandemic, a decision made easier by record stock-market gains. And many are still too afraid of Covid to go back to work.
How many people reenter the labor force — and how quickly — will help determine when the U.S. economy makes a full recovery form the pandemic.
Market reaction: The Dow Jones Industrial Average DJIA and S&P500 SPX were set to open lower in Friday trades. The stock market just set a fresh all-time high.