US non-farm payrolls rise more than expected despite GM strike

By Michele Maatouk

Date: Friday 01 Nov 2019

(Sharecast News) - The US economy added more jobs than expected in October, according to data released by the Labor Department on Friday.
Non-farm payrolls rose by 128,000 despite a strike at General Motors, comfortably beating expectations for an increase of 89,000. Figures for August and September were revised up by 51,000 to a 219,000 gain and by 44,000 to a 180,000 jump, respectively.

Economists had been expecting a 40-day strike at GM to weigh on the payrolls figure, with around 47,000 workers not working last month. Manufacturing employment fell by 36,000 in October. Within manufacturing, employment in motor vehicles and parts declined by 42,000, reflecting the strike.

Meanwhile, the unemployment rate nudged up to 3.6% from 3.5% in September - the lowest level since December 1969 - in line with expectations.

Average hourly earnings were up 3% in October from a year earlier, in line with forecasts and the previous month's rate, which was revised up from 2.9%.

Michael Pearce, senior US economist at Capital Economics, said: "The solid 128,000 gain in non-farm payrolls - despite a near-50,000 hit from the GM strike and a 20,000 census-related drop-back in federal employment - together with upward revisions to previous months' gains leave the underlying jobs picture looking far healthier than before.

"The 46,000 striking workers at GM this month were not counted in the October report, but auto payrolls only fell by 42,000, suggesting the strikes had little impact further up the supply chain. Now the strike is over, those workers will be counted again in the November report. Even with that hit, overall non-farm payrolls rose by a solid 128,000 and there were big upward revisions to past month's gains too.

"The upshot is that the three-month average gain is now 175,000, which is easily enough to outpace population growth. That is in stark contrast with much of the recent survey evidence, which had pointed to a sharp slowdown in employment growth."

Pearce said the strength of the report, together with the news earlier this week of a slightly stronger-than-expected 1.9% annualised gain in third-quarter GDP, would seem to support the Federal Reserve's shift to a more neutral policy stance.

"Nevertheless, given the continuing weakness in the survey evidence - and with the knowledge that these employment figures are likely to be revised down significantly when the annual benchmark revision is incorporated early next year - the Fed may not be done yet, even though a December rate cut now look less likely."

Oanda analyst Craig Erlam said the Fed is looking smart today.

"The mid-cycle adjustment call seems to tentatively be justified with a robust labour market that continues to keep this record expansion going strong," he said.

"The US dollar rallied across the board, but that move could be short-lived as the overall risk-on move will ultimately support the high-beta currencies."

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