Submitted by Julie Young as part of our contributors program.
October Employment Report Shows Continued Stabilization in the Labor Market
In the Commerce Department’s most recent Employment Situation release it reported a monthly increase in the unemployment rate of 0.1%. The increase brought the U.S. economy’s unemployment rate to 7.3% in October. Additionally, the report stated an increase of 204,000 nonfarm payroll jobs and upward revisions to nonfarm payroll increases in August and September. The increase and upward revisions brought the average monthly rate of nonfarm payroll improvement to 109,000. The stabilizing unemployment rate and upward revisions show continued improvements in the labor market. The slight monthly unemployment rate increase, however, was primarily attributed to the October government shutdown and showed signs of continued uncertainty in fiscal policy effects on the economy.
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The effects of the government shutdown were shown in the household data which surveyed respondents about employment during the October 12 week. The number of unemployed workers increased by 17 million from September to October. Government workers on temporary furlough were included in the monthly total and contributed to the 17 million unemployed workers reported in October.
October’s establishment data also showed the broader effects of government employment decreases on the labor market. The report data in the establishment report was unaffected by the furlough because it includes workers who were employed during the October 12 pay period and is not based on a specified week. The establishment data’s Government industry category showed a decrease of 8 million workers overall in the Government sector during the month of October and reflects reductions due to decreased spending and budget sequestration.
While many economists speculate that the Federal Reserve will begin tapering its asset purchase program as soon as December the October employment report indicates even greater sustained stabilization in the labor market may be required. The Employment Situation report is a key indicator for the Federal Reserve’s maintenance of its two key goals which include achieving maximum employment and price stability.
In the Federal Reserve’s October 30 release it stated a goal of 6.5% for the unemployment rate. At this rate the Federal Reserve would consider the economy to be near its maximum employment. While the current unemployment rate of 7.3% is still far from that goal, improvements since the peak of the 2008 financial crisis show that unemployment has clearly been trending downward at a steady pace.
The Federal Reserve’s quantitative easing program continues to be contributing to labor market improvements and price stability. The slightly weaker unemployment rate report in October paired with continued uncertainty in fiscal policy could potentially cause the Federal Reserve to further delay its asset purchase tapering until more continued levels of normal stabilization in the economy overall, and the labor market specifically, are displayed.
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