October Jobs Report Delivers Surprise Unemployment Drop to 6.9%

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao: While the nation is engrossed in the results of the U.S. election, the recovery continues to chug along undeterred. Unemployment dropped to 6.9 percent as Americans surged back into the labor force, according to today's report from the Bureau of Labor Statistics. While there's still a long road ahead with 10.1 million fewer jobs than in February, the recovery continues to exceed expectations month-after-month. Rehiring of Furloughed Workers Rapidly Reducing Unemployment The number of workers on temporary layoff declined sharply from 4.6 million last month to 3.2 million this month as furloughed workers are recalled or find other employment, boosting labor force participation to a new intra-crisis high. While the rehiring of furloughed workers is pulling unemployment down rapidly, it is the low-hanging economic fruit of the recovery. Permanent layoffs were essentially unchanged at 3.7 million, a positive sign that permanent economic damage is not accumulating as quickly as feared. Payrolls Rise with Unchanged Pace of Recovery Payroll employment increased by 638,000 in October, slowing from a 672,000 gain in September. The decline in payrolls is partially inflated by 147,000 Census temporary workers who have finished their work. Excluding government workers, private payrolls rose 906,000, essentially unchanged from the 892,000 jobs gained last month. However, payroll employment overall is still 10.1 million below pre-crisis levels. We're still many months away from a full recovery. Broad-Based Payroll Gains Across Industries, Led by Services The rebound in payrolls was led by service-providing industries including leisure & hospitality (+271,000 jobs added), professional & business services (+208,000) and retail trade (+103,700) in a positive sign that job gains were driven by both rehiring in the hardest-hit sectors as well as growth in other services. However, it remains to be seen whether industries like retail and leisure & hospitality will continue to steadily add jobs as a third wave of COVID-19 surges around the country. Today's report lends some optimism to a recovery that continues to make steady progress. But we are not out of the woods yet. The jobs report is a look back in time, and doesn't fully incorporate the effects of the most recent wave of COVID-19 cases. The trajectory of the recovery is not set in stone, and resurgent headwinds could certainly derail progress. This puts responsibility in the hands of policymakers and the next president to manage both the health and economic crises. Even before Inauguration Day, millions face a serious benefit cliff in the coming months as UI benefits are exhausted and CARES Act programs expire. Today's jobs report sets the economic stage for the next four years. The next president faces the monumental challenge of tackling an ongoing pandemic and economic crisis. This Friday’s jobs report shows the height of the economic mountain still to be scaled but presents the promise of a quicker-than-expected recovery if the dual health-economic crisis can be managed well.

More Insights

The unemployment rate dropped to 6.9%, solidly beating expectations. It beat for the right reasons: a bump in the labor force (it seems the drop in September was a fluke) and no increase in permanent layoffs. Permanently laid-off workers are often last to be rehired, any slowing in permanent layoffs is a sigh of relief for the recovery and for workers. Payroll gains were fairly broad-based across industries. While many industries saw a slight acceleration or deceleration in the rate of recovery, most fluctuations were too small to read into. Government is one area of weakness, even excluding the temporary effect from Census workers. Payroll employment is still down 10.1 million compared to pre-crisis levels. Linearly extrapolating today's job gains (which is a generous assumption) still means it would take 16 months to recover to pre-crisis levels and even longer to make up for unrealized gains over the last 8 months. To speak with Daniel Zhao about today’s jobs report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.