U.S. Employment Bounces Back in October

​U.S. employers added 531,000 new jobs in October, with hiring in leisure and hospitality continuing to lead the way, according to the latest employment report from the Bureau of Labor Statistics (BLS). The unemployment rate fell to a new pandemic-era low of 4.6 percent from 4.8 percent in September.

After more than one million jobs were added in July alone, hiring slowed for the next two months as the delta variant of COVID-19 surged and employers reported difficulty filling roles.

The U.S. economy has now reportedly recovered 80 percent of the jobs lost at the depth of the recession in 2020, but there are still over 4 million fewer jobs than there were before the pandemic, and a labor force participation rate which remains troublingly below pre-pandemic levels.

"COVID-19 was less of a drag on the labor market in October," said Julia Pollak, chief economist at ZipRecruiter. "The number of Americans who were absent due to illness, the number working remotely due to COVID-19, and the number prevented from seeking work due to the virus all fell as delta waned. That is an encouraging sign that 'missing workers' could return in the coming months." 

Private payroll gains were even stronger than the headline number in October, reaching 604,000, but the net employment total was pulled down by another weak month for public-sector jobs, (mostly in education) which showed a loss of 73,000.

The revisions for the past two months were more good news: Totals for both August and September include 366,000 more jobs added than originally reported. So far this year, monthly job growth has averaged a solid 582,000. At the current monthly average pace, full job recovery from the pandemic could happen sometime next year, experts said.

"While payroll growth is not back to summer levels, the improvement is a healthy acceleration in the recovery," said Daniel Zhao, Glassdoor senior economist. "And while COVID-19 cases have fallen since September, they are still elevated, which suggests job growth in October was still being held back by the pandemic, opening up the possibility of faster growth in the late fall if the public health situation continues to improve."

Kevin Harrington, CEO of job search platform Joblist, said that it was encouraging to finally see a strong bounce back after lagging jobs growth. "In particular, it's encouraging to see a high number of jobs added in hard-hit industries like leisure and hospitality, where many employers have reported hiring struggles this year," he said. "The best stimulus for the labor market has always been an improving public health situation. If delta continues to abate and we can avoid further surges this winter, we could see an even stronger hiring season through the end of the year and into 2022."

Solid Gains

The crucial leisure and hospitality sector added 164,000 jobs last month as more people patronized restaurants and bars and went on vacation. The sector has reclaimed 2.4 million positions lost during the pandemic so far this year but is still down by 1.4 million jobs.

Job growth was widespread across sectors, which posted solid gains. "Manufacturing added 60,000 jobs and construction added 44,000 jobs despite supply chain disruptions in a sign of strength for goods-producing sectors," Zhao said.

Other sectors posting growth included professional and business services (100,000) and transportation and warehousing (54,000), while health care was up 37,000, mostly in home health care services and nursing care facilities, and retail added 35,000 new jobs.

The disappointment once again was in public-sector education, with state and local schools shedding a combined 65,000 jobs.

Seasonal adjustment overstates education job losses, Zhao explained. "This is due to smaller-than-expected hiring at the start of the school year, but that expectation is based in part on seasonal patterns from before COVID-19. Due to leaner school workforces, these seasonally adjusted losses are likely overstated."

The BLS noted that recent employment changes in education are challenging to interpret, as pandemic-related staffing fluctuations have distorted the normal seasonal hiring and layoff patterns.

But schools still have much catching up to do, Pollak said. "The nation's schools started the school year with 723,000 fewer staff on payroll than before the pandemic. That is despite Congress' allocation of almost $200 billion to public schools in COVID relief bills—far more than typically flows to schools through the federal budget."

She added that many schools "were blindsided by how difficult it was to fill vacancies in August and September but will need to play hiring catch-up in the coming months. As labor supply improves and schools redouble their hiring efforts, we could see substantial gains in education payrolls."

Since February 2020, employment is down by 370,000 in local public education, by 205,000 in state public education, and by 148,000 in private education.

The increase in temporary help services (by 41,000 jobs) points to a future boom in permanent hiring, Pollak said. "Employers responded to the increase in demand for goods and services by hiring temporary workers. Many of these will likely convert to permanent staff if pandemic conditions continue to improve."

Unemployment Falls

The unemployment rate drop came with the labor force participation rate staying flat at 61.6 percent, 1.7 percentage points below its February 2020 level.

"The report clearly points to a demand-driven recovery where rapid hiring is shrinking the ranks of unemployed workers, including long-term unemployed workers, but not yet drawing workers who are missing from the labor force back off the sidelines," Pollak said. "Absent the pandemic, there would be about 5 million more people in the labor force. If pandemic conditions continue to improve, and the unemployment rate continues to fall, we could see large numbers return, easing labor shortages and hiring constraints."

A separate measure of unemployment that incudes discouraged workers and those holding part-time jobs for economic reasons fell to 8.3 percent from 8.5 percent. It was around 7 percent before the pandemic.

Nick Bunker, an economist at the Indeed Hiring Lab, said that the potential for a quick recovery can be seen in the current trend in the prime age employment-to-population ratio. "If that metric were to grow at its recent pace, it would hit its pre-pandemic level by next fall," he said.

Wages on the Rise

In October, average hourly earnings in the private sector increased by 11 cents to $30.96, following large increases in the prior six months. Wages have risen 4.9 percent year-over-year.

The largest wage gains were seen in transportation and warehousing as well as in leisure and hospitality, as labor shortages in those sectors continue to move employers to offer higher wages.

"Demand still remains high enough to push wage growth higher," Zhao said.

Employment Reset

The report represents the beginning of a reconciliation between U.S. companies and workers, said Becky Frankiewicz, president of ManpowerGroup, NA.

"As stimulus ended, employers realized they needed to move closer to what workers want in order to bring them back in, with higher wages, greater flexibility and more focus on health and wellbeing," she said. "Employers accept that good wages are now table stakes, and that employees are seeking more flexibility and more purpose in their lives. Participation is not where any of us would like it to be. Workers are trickling back in yet there is more that needs to be done to bring people back, particularly as we begin to see the sectors that are set to grow post-pandemic. Our data tells us attracting talent to IT and tech roles needs to be a top priority."