3 Things to know about the October 2017 jobs report

Jobs Report

The economy added 261,000 jobs and the unemployment rate ticked down to 4.1 percent last month—the lowest in 17 years.

The U.S. job market bounced back after hurricane-related disruptions in September, but a decrease in annual wage gains and a surge in the number of people dropping out of the labor force put a damper on October’s economic performance. The economy added 261,000 jobs and the unemployment rate ticked down to 4.1 percent last month—the lowest in 17 years. However, that's less than the approximately 300,000 economists had been expecting -- and indicates the recovery from the hurricanes is happening slower than predicted. The labor participation rate also dropped to 62.7 percent, from 63.1 percent.

What does that mean? According to CNN Money: “‘You can look it at as a marathon or a sprint. Other expansions were more like a sprint. This is a marathon," says Robert Frick, chief economist at the Navy Federal Credit Union. Another way to put it: ‘The party can go on for a lot longer. It's just not a wild party.’”

As you may know, following each month’s BLS jobs report, we read dozens of news reports, scour the web, and break what we find down to three key talking points you can use. Whether you’re taking a break at the office water cooler or conversing with peers in the industry, you’ll have these conversation starters in your pocket.

The Storm Effect

While the hurricanes in Texas and Florida had a measurable effect on the jobs in September, the market rebounded in October—though not as strongly as anticipated.

According to Bloomberg: “Weather-related distortions may make it hard to read too much into the data until the end of the year. Still, economists expect a return to the underlying trend of steady, albeit slower, hiring that’s still enough to keep pushing down the unemployment rate.”

According to Reuters: “Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms, in part because of the return of the lower-paid industry workers. That lowered the year-on-year increase to 2.4 percent, which was the smallest since February 2016. Wages shot up 0.5 percent in September, lifting the annual increase in that month to 2.9 percent.”

When will wage growth accelerate?

Despite a continued decrease in the unemployment rate, economists were disappointed in October’s lack of wage growth.

According to US News & World Report: “Indeed, average hourly earnings remained relatively unchanged in October at $26.53 and were up only 2.4 percent on the year. Analysts have long been hoping that a tighter labor market in which available workers are few and far between would encourage companies to boost the pay of their employees to attract and retain talent. Thus far, though, it seems employers have been reluctant to go that route.”

Will the Fed raise rates?

Even though wages still aren’t growing as quickly as economists had hoped, other factors signal a thriving economy and the potential for the Fed to raise interest rates.

Reuters: “‘The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook,’ said Michael Hanson, chief U.S. economist at TD Securities in New York. ‘Overall, sustained job growth and labor market slack at pre-crisis lows keeps December in play.’”

According to Bloomberg: “With payroll gains averaging about 162,000 over the past three months, the jobs report broadly provided more evidence the economy is approaching maximum employment, probably keeping Federal Reserve policy makers on track to raise interest rates in December for the third time this year.”

‘There are obviously storm distortions in this report, but the decline in the unemployment rate reflects ongoing improvement in the labor market. November is going to clear a lot of this up,’ said Michael Gapen, chief U.S. economist at Barclays Plc in New York and a former Fed official. The report ‘is in line with the Fed’s expectations. It definitely increases the odds of a December rate increase.’”

CBS News: “"If we look at the unemployment rate alone, we are missing the full picture," said Elise Gould, senior economist at the worker-focused Economic Policy Institute. “The prime-age employment-to-population ratio is still far below levels expected in a stronger economy. Furthermore, nominal wage growth continues to lag behind target levels... All told, it's clear that we are still not at full employment, and the Federal Reserve should keep interest rates low until we are.’”