HFF Analysis of the October 2018 BLS Employment Report

Monday, November 5, 2018

HFF is pleased to report on the latest employment expansion statistics from October 2018. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a higher-than-expected 250,000 jobs in October. Figures were revised downward to 118,000 in September and upward to 286,000 in August, a net revision of zero. Payroll creation has averaged around 200,000 since October 2010, marking the 97th month of consecutive growth. The period of monthly gains is around four years longer than the prior longest streak from 1986 to 1990.

Unemployment remained at 3.7 percent, its lowest level since December of 1969.  Unemployment has now been below five percent for 25 consecutive months. Wage growth gained momentum coming in at 3.1 percent, 30 bps higher than September of 2018’s rate and its highest level since 2009. 

The labor force continued to grow with 711,000 people joining in October of 2018, while the labor participation rate rose 20 bps to 62.9 percent. The continued strong employment environment has economists keeping with their forecast of four rate hikes in 2018.

Average Monthly Payroll Creation Steady 

The current expansion cycle is similar to the one from 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.  

 

 

Job Growth Steady and Strong in 2018

The U.S. created 2.18 million jobs in 2017 and 2.52 million in the last 12-month period. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

 

 

Job Growth Positive in Almost All Major Job Sectors

In 2017, the U.S. created 2.18 million jobs, but nearly 40 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. 

Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 516,000 jobs, a year-over-year growth rate of 2.5 percent, just below the five-year average growth rate of 2.6 percent. Temporary Staffing accounted for 66,000 (approximately 13 percent) of these positions.

Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 499,000 jobs in the year ending October 2018. Construction added 330,000 jobs (up 4.7 percent year over year) in the year ending October 2018.  Comparing this, construction added 201,000 jobs (up three percent) in the year ending October 2017.

 

 

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. The Unemployment Rate remains low at 3.7 percent in October 2018, marking the 25th consecutive month below five percent.

The Underemployment Rate came in at 7.4 percent in October 2018, a 10 basis point decrease from the prior month. Fortunately, the Underemployment Rate has continued its descent from a 2009 high of just over 17 percent. The spread between the two rates is at 370 bps and has been compressing gradually having reached a high of 740 bps in September of 2011.

 

 

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The current year-over-year wage growth registered at 3.1 percent, rising 30 bps from 2.8 percent the month before. The past three recessions were preceded by a period of FOMC tightening, which align also with an average hourly earnings growth in excesses of four percent reflecting strong economic activity overall. 

 

 

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Laura Bancroft and Morgan Allen and HFF Managing Director of Research Jimmy Hinton

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