Unemployment rate hits 7-year low
Employers add 271,000 jobs; investors expect Fed to increase rates.
U.S. hiring roared back in October after two weak months, with employers adding a robust 271,000 jobs and likely setting the stage for the Federal Reserve to raise interest rates next month.
The unemployment rate dipped to a fresh seven-year low of 5 percent from 5.1 percent.
The burst of hiring, the most since December, filled jobs across a range of industries as companies shrugged off slow overseas growth and a struggling manufacturing sector. Significant job gains occurred in construction, health care and retail.
Friday’s report from the government suggested that the U.S. economy is rebounding after a worrisome summer and is continuing to outshine other major economies. During August and September, U.S. hiring had flagged amid financial turmoil in China and faltering growth in Europe and emerging markets.
Even so, American consumers have kept spending at a healthy pace, supporting strong job growth even as factory payrolls were flat last month and oil and gas drillers cut jobs.
Soon after Friday’s report was released, the prospect of higher interest rates drove down financial markets. And the yield on the benchmark 10-year Treasury note had surged to 2.33 percent from 2.23 percent Thursday, suggesting that investors see a greater likelihood of a Fed rate hike.
After a prolonged peri- od of relatively stagnant pay raises for many Americans, last month’s robust hiring also raised average wages 9 cents to $25.20 an hour, 2.5 percent higher than 12 months ago and the sharpest year-over-year gain since July 2009. That is comfortably above inflation, which was been flat in the past year.
The solid pay gains should fuel more consumer spending in coming months, which could support further hiring.
“These are very strong numbers and likely to continue,” said Carl Tannenbaum, chief economist at Northern Trust.
Retailers added nearly 44,000 jobs in October, the most since November and a sign that they anticipate healthy sales for the holiday shopping season. Hotels and restaurants added 41,000.
Matt Friedman, chief executive of the Wing Zone restaurant chain, said he thinks lower gas prices are encouraging more people to eat out and boosting sales at his company’s 93 U.S. sites.
Company sales have grown 6 percent this year from 2014. Wing Zone is adding three jobs to its 18-employee headquarters staff and expects to open 15 stores this year and 19 next year.
“People are spending more money,” Friedman said. “Fuel prices have a big impact.”
During October, many high- er-paying sectors enjoyed healthy gains, notably professional and business services, which includes lawyers, architects and engineers. That sector added 78,000 positions, the most in nearly a year.
Some economists cautioned that the explosiveness of October’s job growth was likely in part a bounce-back from the tepid gains in August and September, when fears about the global economy had led some employers to hold back.
“We see some makeup from hiring that was put off when the economy was hesitant in the late summer and early autumn,” said Patrick O’Keefe, director of economic research at CohnReznick.