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November 1, 2019 Blog 1 min read
Over the past decade, the labor market has demonstrated surprising strength many times even as other measures of the economy cast a shadow of doubt. It’s doing so again.
11-1-19 Employment Situation ChartEmployment market conditions remain quite strong – surprisingly so, in fact. Nonfarm payrolls surprised to the upside in October, rising 128,000 for the month. That alone was modestly below expectations, but unexpectedly strong upward revisions to August and September tallies added another 95,000 over that period. The result was an exceptionally positive report on the state of the labor market.

The jobless rate edged slightly higher to 3.6%, but remains near half-century lows. The labor force participation rate (the government’s estimate of the size of the labor force relative to population) edged higher in October. Tight labor market conditions are drawing people into the workforce at a pace that outstrips growth in the working age population. Nearly 1.7 million Americans have joined the labor force in the past year, providing a welcome supply of labor for employers that are finding it increasingly difficult to fill job openings.

Many had expected the October report to be weaker as a result of the GM strike that sidelined a sizable workforce at the automaker, but also rippled down through its supply chain. The secondary effects were also felt in businesses in the surrounding communities. The impact was apparent, as the manufacturing sector shed an estimated 36,000 for the month, directly traceable back to automobile production. The 6-week strike finally ended on October 26, making it the longest auto workers strike in about 50 years. The return of impacted workers should provide a bit of a lift to November payrolls.

The fact that total payroll gains with revisions were as strong as they were despite that significant headwind is powerful evidence that the jobs engine hasn’t stalled. The third-quarter GDP report told a similar story, one of slower growth overwhelmingly driven by the consumer sector, but in an economy that is still growing modestly above trend.

Wages posted a modest gain last month and were up about 3.0% over the past year. Stronger wages, coupled with solid job creation, should provide continued fuel for a resiliently optimistic consumer sector to spend more in the coming months. More than any other factor, consumer spending appears likely to keep the economic train powering ahead in the near term.
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Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis non-factual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.