No More 10 Minute Breaks: 5 Things to Watch in the October Jobs Report

The U.S. government releases its broad measure of the October labor market on Friday. Economists surveyed by The Wall Street Journal expect the Labor Department to report employers added 188,000 jobs during the month and unemployment held at 3.7%. Here are five things to watch in the report.

1. Wage Breakthrough

Workers’ wages are poised to break through a 3% annual growth ceiling that’s held firm for nearly a decade. Economists surveyed by The Wall Street Journal project that average hourly earnings advanced 0.2%, or about 5 cents an hour, in October from September. Such an increase would result in wages advancing 3.1% from a year earlier. Wages haven’t exceed 3% year-over-year growth since April 2009. The strong annual gain in October in part reflects that wages declined, on a monthly basis, in October 2017. Still, the broader trend is one of improving pay for workers. It’s a sign that after years of sluggish growth, a historically tight labor market is delivering raises.

2. Cooling Hiring?

Economists expect hiring to bounce back after a soft September, when employers added 134,000 jobs to payrolls. That was the smallest monthly increase in a year. Over the past 12 months, employers added an average of 211,000 jobs to payrolls each month. If October’s payroll gain again comes in well below expectations, that could raise concern the labor market and broader economy are coming down from their cyclical peak.

3. Weather, Again

Hurricane Michael struck the Florida Panhandle on Oct. 10 and caused damage across a swath of Southern states. Like Hurricane Florence, which made landfall a month earlier in the Carolinas, Michael’s impact was felt in relatively lightly populated areas, limiting the effect on the broader economy. Last month, 313,000 workers did not report to work due to bad weather, but they were not counted as unemployed. Some economists attributed September’s modest hiring to Florence, and Michael might make a similar dent. However, that could set up strong gains the last two months of the year, if businesses are playing catch up.

4. A New Low?

The unemployment rate dipped to a 49-year low in September. Can it fall further? That will largely depend on whether low joblessness and modestly higher wages draw would-be workers off the sidelines. If more are pulled into the labor force, the unemployment rate could hold steady or even rise. If the rate declines, that could ratchet up pressure on employers to raise wages further. New unemployment records are unlikely to be set with the latest report. The rate was less than September’s reading in December 1969, at 3.5%. And it touched 3.4% earlier that year. It would need to drop to 3.3% to be the lowest rate since the 1950s.

5. Market Reaction

The jobs report may need to walk a narrow tightrope to please investors, who have been jittery in recent weeks. A strong report showing increasing wages and falling unemployment could stoke concerns the Federal Reserve will keep raising interest rates into next year in an effort to prevent the economy from overheating. Higher interest rates typically weigh on stock prices. But a report showing a second straight month of weak hiring could feed the narrative that stimulus from tax cuts and government spending is quickly fading. Investors might be happy if hiring remains strong but a growing labor force keeps wage growth in check.

Low-Income Workers See Long-Awaited Wage Gains (Oct. 5)

When Has U.S. Unemployment Typically Been This Low? Wartime (Oct. 5)

U.S. Unemployment Rate Falls to Lowest Level Since 1969 (Oct. 5)

from Real Time Economics https://ift.tt/2Pw8dxU