October Jobs Report: What Will Winter Bring?

ADP reported nonfarm payroll increased by 534,000 jobs from October to November, which is slightly higher than the September to October increase of 531,000 jobs. The bulk of which came from the service-providing sector which accounted for 79.4% of new jobs. However, due to a possible winter COVID-19 wave, this brings concerns as to whether private-sector payrolls will stay at these levels.

Economists believe that employment growth can’t sustain this pace unless the labor force makes a more notable recovery in upcoming months. This is especially important because the unemployment rate is poised to decrease from 4.6% to 4.5%, which would be the lowest we have seen dating back to March 2020. With the federal vaccine mandate covering over 100 million workers and taking into effect January 4, it has been suggested that private-sector payrolls could decrease and the unemployment rate could increase in upcoming months. While workers appear to slowly be entering back into the workforce, economists believe a more profound increase won’t occur until spring 2022.

Labor force participation is expected to increase slightly from October’s 61.6% to 61.7%, which still falls well below pre-pandemic levels which were hovering around 63.3%. With Inflation chipping away at individual spending power and fiscal support dwindling, it is expected that people should want to make the transition back to work. However, outside factors involving pandemic work obstacles continue to stunt labor force participation recovery. The Fed also emphasized equitable job growth across different groups and reviving labor force participation levels as their key focus.

As inflation continues to rise, average hourly earnings rates have seen recent new heights as well. November’s average hourly earnings is expected to stay on par with October’s, coming in at .4%. The year-to-year average hourly earnings rates is expected to be at 5% which would be the highest it’s been in three decades. This indicates inflation is high in importance when it comes to the Fed’s focus as well.

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