US Unemployment Falls to 5.8%, Payrolls Rise

Construction workers build a composite-block wall at a project in Texas. (Photo courtesy of PRNewsFoto/Bautex Systems)
U.S. Unemployment, Jan, 2012 - Oct, 2014.
U.S. Unemployment, Jan, 2012 - Oct, 2014.

U.S. job growth increased at a fairly brisk clip in October and the unemployment rate fell to a fresh six-year low of 5.8 percent, underscoring the economy's resilience in the face of slowing global demand.

The report shows that the economy has gained jobs for 56 months in a row.

White House economic advisor Jason Furman says the economy is on pace for its best year since the 1990s, but says more must be done to help people who are still out of work.

Despite the strengthening labor market picture, wage growth remained tepid, suggesting the Federal Reserve would be in no hurry to start lifting interest rates.

Employers added 214,000 new jobs to their payrolls last month, the Labor Department said Friday. The unemployment rate fell from 5.9 percent, even as more people entered the labor force, a sign of strength in the jobs market.

Data for August and September were revised to show 31,000 more jobs created than previously reported.

"It all speaks to the story that the U.S. can sustain pretty strong growth even when there are concerns about growth slowing in places like China and the euro zone," said Jeff Greenberg, a senior economist at JP Morgan Private Bank in New York.

Greenberg made the comments before the release of the closely watched employment report. Economists polled by Reuters had forecast 231,000 new jobs last month and for the unemployment rate to hold steady.

Economy grows

Job growth has exceeded 200,000 in each of the last nine months, sufficient strength to keep the economy on a higher growth path after it expanded at a 3.5 percent pace in the third quarter. The relatively strong pace of job gains also signals that the slack in the labor market is being absorbed.

The Fed last month struck a fairly upbeat tune on the jobs picture as it ended its bond buying program, dropping its characterization of labor market slack as "significant" and replacing it with “gradually diminishing.”

Sturdy job gains alone probably won’t be enough to convince the U.S. central bank to start raising interest rates before the second half of 2015, given a still-low level of inflation.

Wages remain sluggish

Wage growth is the missing piece of the jobs recovery. Without significant increases, most economists say the Fed will be in no rush to lift benchmark lending rates that it has kept near zero since December 2008.

The employment report showed that average hourly earnings rose only three cents last month. That left the year-on-year change at 2.0 percent, way below the pre-recession readings.

But other data have begun to show accelerating wage growth.

Details of the October employment report were fairly upbeat. The labor force participation rate and the ranks of the long-term unemployed both improved. These metrics are on Fed Chair Janet Yellen's so-called dashboard and are being watched for clues on the timing of the first rate hike.

The participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased by one-tenth of a percentage point to 62.8 percent, bouncing back after two straight months of declines.

The employment-to-population ratio increased to 59.2, the highest level since 2009.

Broad unemployment declines

A broad measure of joblessness – which includes people who want to work but have given up searching and those working part time because they cannot find full-time employment – fell to 11.5 percent, the lowest level since September 2008.

As for job gains, they were broad-based in line with the recent trend. Private-sector employment increased by 209,000, with a second straight month of gains in manufacturing and an increase in construction.

Retail hiring advanced by 27,100 as stores gear up for a busy holiday shopping season.

Government employment increased 5,000 last month.