Job Market Resilient In October Despite GM Strike, Beating Expectations | Texas Public Radio

Job Market Resilient In October Despite GM Strike, Beating Expectations

Nov 1, 2019
Originally published on November 1, 2019 3:54 pm

Updated at 12:10 p.m. ET

U.S. employers added 128,000 jobs in October as the unemployment rate inched up to 3.6%.

Friday's report from the Labor Department suggests job growth remains resilient, despite the ongoing trade war and temporary setbacks such as the United Auto Workers strike at General Motors, which was settled a week ago.

Job gains for August and September were also revised upward by a combined 95,000.

"Overall, it was a very strong report when you consider some of the headwinds," said senior economist Sarah House of Wells Fargo Securities. "While the labor market might not be growing quite as quickly as it was in 2018 or even in the early part of this year, it's not collapsing by any means either. Employers are still out there hiring. More people are collecting a paycheck. And that's all a good sign for consumer spending."

Investors welcomed the better-than-expected report. The Dow Jones Industrial Average and the S&P 500 index both jumped sharply in the first hour of trading.

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The GM strike did take a bite out of manufacturing employment. Factories shed 36,000 jobs in October. Some 46,000 GM workers are now back on the job after 40 days on the picket lines.

"They were starting to feel a little bit of the pinch, but they're glad to be back," said Randy Freeman, president of UAW Local 652 in Lansing, Mich. "They're glad to be working, and having this behind them, and going into the holiday season."

Manufacturing has also suffered from slowing demand in the rest of the world as well as the president's trade war. A separate report from the Institute for Supply Management showed manufacturing activity contracted in October for the third consecutive month.

That was offset in the October jobs report, though, by strong growth in the much larger services side of the economy. Services — such as hospitality and health care — are typically consumed locally, and so are less affected by global forces.

The modest rise in the unemployment rate came as hundreds of thousands of new people entered the workforce.

"That's encouraging that folks feel like there's job opportunities out there," House said. "We're getting more people coming in and looking for work."

Average wages over the past 12 months have increased 3%, a slight acceleration from the previous month.

The U.S. economy is growing more slowly now than it was earlier in the year — dragged down in part by weak business investment. On Wednesday, the Commerce Department reported that the economy grew just 1.9% between July and September.

Eventually, that slower growth could become a drag on the job market and that in turn would cut into consumers' buying power. But Federal Reserve Chairman Jerome Powell told reporters this week he's not worried yet.

"That's a risk that we've been monitoring, but we don't see it yet," Powell said.

The central bank cut interest rates by a quarter percentage point on Wednesday to guard against further slowing. But Powell suggested that might be the last rate cut for a while, unless the economy worsens.

"Consumers are doing well and are focused on the good job market and rising incomes," he said. "That is the thing that is pushing the economy forward and it doesn't seem to have been affected so far by weakness in the other areas."

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DAVID GREENE, HOST:

The U.S. stock market is still humming, despite the ongoing trade war and some temporary setbacks like the General Motors strike. Employers added 128,000 jobs in October, and that's more than forecasters were expecting. Job gains for both August and September were also revised upwards. President Trump celebrated the good news, tweeting, quote, "USA rocks." NPR's Scott Horsley joins me to talk about this. Hi there, Scott.

SCOTT HORSLEY, BYLINE: Hi, David.

GREENE: OK, so this was a surprisingly strong report from the Labor Department. What is it - exactly is it saying here?

HORSLEY: It was a surprisingly strong report. Forecasters were bracing for a really weak jobs report - partly because of that GM strike but also because we've seen signals the overall economy has been shifting to a lower gear. In general, forecasters were expecting to see job gains of 75,000 to 100,000 in October. This beats that by a good margin. And the job gains for August and September were also revised up by a total of 95,000. What this is telling us is that the U.S. job market is remarkably resilient despite headwinds like a slowing global economy and all the uncertainty that surrounds the president's trade war. Now, all the job gains in October and the vast majority of job gains in August and September were on the services side. There were big gains in things like hospitality and health care. Those are things you tend to consume locally, so they're less affected by global headwinds.

GREENE: Did the good news extend to the manufacturing sector? Because I know that's been a real weak spot.

HORSLEY: And it continues to be a weak spot. We're going to get some more information about manufacturing later this morning. But factories, along with farms, have taken the biggest hit so far because of the trade war. According to the Labor Department, there were 36,000 fewer manufacturing jobs in October than the month before. But some of that is a temporary slowdown because of that GM strike. Of course, that strike's settled now, and that means tens of thousands of auto workers are back on the job after 40 days on the picket lines. I talked to Randy Freeman. He's the president of UAW Local 652 in Lansing, Mich.

RANDY FREEMAN: They were starting to feel a little bit of a pinch, but they're glad to be back. They're glad to be working and having this behind them and going into the holiday season.

HORSLEY: And, of course, now the UAW has reached a tentative agreement with Ford, as well, so that's good news for auto employment.

GREENE: How about the unemployment rate? I mean, that's something we always look to.

HORSLEY: Yeah. It's still really low, but it did inch up by a tenth of a percent to 3.6%. That's because the job market's been so strong, a lot of people who were on the sidelines are now coming back into the workforce. So that's encouraging. We also saw a slight acceleration in wages. Over the last year, average hourly wages have increased by about 3%.

GREENE: All right - largely good news. At a moment like this, we always look to the stock market to see if investors are reacting, and I guess the market's open. Are we seeing anything?

HORSLEY: Yes. The markets like what they're seeing in this jobs report. The Dow Jones Industrial Average is up about 160 points at this moment, little over half a percent. You know, earlier this week, the Federal Reserve cut interest rates by a quarter percentage point. The market also liked that. But the Fed signaled that could be the last rate cut for a while unless the economy turns south. The overall pace of economic growth has been slowing, and there's a chance that the manufacturing problems could spill over into the job market. But Fed Chairman Jerome Powell says he and his colleagues aren't worried about that just yet. Right now the job market and consumer spending is holding up really well. And that's certainly underscored by this better-than-expected report from the Labor Department.

GREENE: All right. Talking through these new jobs numbers with NPR's Scott Horsley. Scott, we appreciate it. Thanks a lot.

HORSLEY: Good to be with you, David.

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