Good news on the U.S. jobs front as nonfarm payrolls rose by 531,000 last month, although employment in the retail trade continues to lag.
The new tally, above the estimate of 450,000, lowers the unemployment rate to 4.6 percent, better than the 4.7 percent rate that was expected. October’s gains also showed a sharp increase from September’s 312,000 jobs.
“Today is another great day for our economic recovery. America is getting back to work. Our economy is starting to work for more Americans,” President Joe Biden said Friday. “Thanks to the economic plan we’ve put through in Congress earlier this year and a successful vaccine deployment, America continues to add jobs at a record pace.”
He noted that the decline in the unemployment rate to 4.6 percent “included a substantial drop in unemployment for Hispanics.”
“In total, the job creation in the first full nine months of my administration is about 5.6 million new jobs—a record for any new President,” he said.
Biden said that before Congress passed the American Rescue Plan, forecasters said it would take until the end of 2023 to get to a 4.6 percent unemployment rate. “Today, we’ve reached that rate two years before forecasters thought it was possible,” he said.
In the retail trade, employment rose by 35,000, mostly in food and beverage stores at a gain of 16,000. General merchandise stores saw gains of 15,000. However, retail trade employment remains 140,000 lower than its level in February 2020, according to information from the Bureau of Labor Statistics on Friday.
“October’s 531K increase in employment hinted that many of the recent headwinds to hiring, such as the Delta variant, parts shortages and the availability of labor itself, are beginning to ease,” according to a research note from Wells Fargo economists Sarah House and Michael Pugliese on Friday.
Employers continue to raise pay at a strong rate in order to attract and retain workers, and that the “increases appear to be pulling workers back into the job market,” House and Pugliese said. They expect hiring to remain robust over the coming months. Even though consumer prices were up 6.6 percent at an annualized pace in the third quarter, the rise in labor income at a 10.8 percent annualized rate over the past three months suggest that “consumer spending growth should keep growing through the fourth quarter of this year,” the economists concluded.
“The most likely scenario is that many Americans will return to the labor market in the coming months, and job-search intensity among job seekers will increase, as their savings gradually deplete, leading to labor shortages easing a bit,” Gad Levanon, head of The Conference Board’s Labor Market Institute, said. “But while severe shortages continuing into 2022 is not the most likely scenario, the chances of it are significantly increasing.”
That’s a scenario in which a wage-price spiral could occur—where higher prices and rising wages feed off each other—which Levanon said could lead to faster increases in both and have major economic implications. “In such an environment, the Federal Reserve might be forced to raise interest rates significantly more than the two hikes markets are currently expecting. This would slow GDP growth to well below current expectations by economists,” he said.
For now, the National Retail Federation, a retail industry trade group, remains confident that the 2021 holiday season will see record growth in November and December. NRF is projecting holiday sales will grow between 8.5 percent and 10.5 percent over 2020 to a total between $843.4 billion and $859 billion.
“Even at the low end of the forecast, that would be both the largest growth rate—topping last year’s 8.2 percent—and the largest total amount—beating last year’s $777.3 billion—on record,” NRF said on Tuesday.
“There are several factors coming together to have a major impact on the holiday outlook, but household fundamentals are a bright spot in the uncertain present,” Jack Kleinhenz, NRF’s chief economist, said. “Consumers are in a very favorable position going into the last months of the year and are spending because they can.” The chief economist said that a “savings buffer” of $2.5 trillion accumulated by consumers who have largely stayed home last year during the pandemic has “supercharged” spending.