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US employers add solid 161K jobs; contractors add 11K (UPDATE)

Christopher S. Rugaber
AP Economics Writer

WASHINGTON (AP) — U.S. employers added a decent 161,000 jobs in October and increased pay sharply for many workers. The report came as the last of its sort to be made on the country’s lukewarm but durable economy before Americans choose a new president next week.

Construction employer, for their part, added 11,000 jobs from September to October, bringing employment in the industry to its highest level since December 2008. The Associated General Contractors of America reported that 6.679 million people were working in construction last month, a number up 11,000 from September and 195,000 from October 2015.

Ken Simonson, AGC chief economist, said private spending has helped to buoy the industry even has public-sector projects have become less common.

“Overall construction employment would certainly be higher if local, state and federal officials were investing more to build new and repair aging infrastructure,” Simonson said.

The AGC also reported that construction workers’ average hourly earnings increased by 3.2 percent through October, eventually hitting $28.39. The AGC said the industry’s persistent labor shortage is likely putting upward pressure on pay.

The Labor Department’s monthly employment report Friday sketched a picture of a resilient job market. The pace of hiring has been consistent with a decent economy, yet one also pitted by weaknesses that have left many Americans feeling left behind on the eve of Election Day.

Job increases last month helped cut the unemployment rate to 4.9 percent from 5 percent. And average hourly pay took a big step up, rising 10 cents an hour to an average of $25.92. That is 2.8 percent higher than a year ago and is the sharpest 12-month rise in seven years.

“If you wanted to show that the economy is still getting better for the typical voter, this report gives you what you needed,” said Jed Kolko, chief economist at Indeed, the job site.

The rise in pay follows a substantial increase last year in earnings for the typical household. The economy appears to be finally delivering widespread raises after years of sluggish gains in pay. With the unemployment rate near satisfactory levels, businesses are likely having to try harder to attract workers.

When businesses are forced to offer higher pay, they often end up raising prices to cover the resulting costs, possibly boosting inflation. That prospect has helped make it likely that the Federal Reserve will raise interest rates for the first time this year when it meets next month.

“The only remaining obstacle to the Fed hiking in December would be a significant adverse financial market reaction to the US presidential election,” Chris Williamson, an economist at IHS Markit, wrote in a research note.

Despite the job gains, the economy is growing at the slowest pace seen in any recovery since World War II. Growth picked up to a 2.9 percent annual rate in the July-September quarter, the government has estimated, much faster than the 1.1 percent pace for the first half of the year. But most analysts foresee only modest expansion in the October-December quarter, leaving growth at an anemic rate of about 1.8 percent for all of 2016.

Hiring in October was led by professional and business services, a category that includes mostly higher-paying jobs in engineering, accounting and information technology. Those added 43,000 jobs, followed by health care firms, which added 39,100.

One surprise was in retail, which shed 1,100 workers last month, a time when hiring typically ramps up for the winter holidays.

The unemployment rate fell in part because many of those out of work stopped searching for jobs and were no longer counted as unemployed. Their exodus lowered the number of unemployed by 150,000 to 7.8 million and pushed down the unemployment rate. The percentage of Americans who either have a job or are looking for one fell slightly.

Consumers — the U.S. economy’s primary fuel — are showing some staying power, even though their spending slowed in the July-September period. Consumer spending did rise at a robust pace in September alone.

Much of that spending was on higher-priced purchases, including cars and homes. Auto sales are running close to last year’s record high of more than 17 million. And while home sales have leveled off this year, they have done so at the sound level of 5.5 million.

Businesses, though, have been cutting their spending on machinery, computers and other equipment. They have reduced such spending for the past four quarters — the longest such stretch since the recession officially ended in mid-2009.

Manufacturers cut 9,000 jobs last month and have shed more than 50,000 in the past year. That slowdown may reflect jitters about the election and uncertainties about the next president’s economic policies.

The cutbacks have slowed factory output for the past year. Orders for manufactured goods have dropped 2.3 percent in 2016 compared with last year. That’s a big reason factories have shed nearly 50,000 jobs in the past 12 months.

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