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U.S. unemployment rate up to 10.2% — highest since April 1983
Nov 6, 2009
The labour market report showed a slightly bigger-than-expected number of jobs lost in October with 190,000 positions cut compared to market forecasts of a 175,000 decline. However, the report showed solid revisions to the declines in previous months with September's loss at 219,000 (revised from -263,000) and August's number revised to -154,000 from -201,000, meaning that 91,000 fewer jobs on balance were cut during that two-month period. The report showed a bigger-than-expected rise in the October unemployment rate to 10.2% from 9.8% in September.
The weakness in employment was relatively broadly based, although most of the decline came in the goods-producing sectors, which shed 129,000 jobs. Service-producing industries dropped a more modest 61,000 jobs. Within the goods sector, the declines were evenly spread out with construction losing 62,000 jobs and manufacturing dropping 61,000. Within the service-producing component, most major industries except professional/business services and temporary help services saw declines, led by trade, transportation and utilities (-66,000), retail (-40,000) and leisure/hospitality (-37,000). Employment in the government sector was unchanged after a hefty 40,000 job reduction in September.
The workweek measure held at 33 hours for the overall economy, although the workweek in manufacturing rose to 40 hours from 39.9 hours in September. Overtime rose to 3.2 hours. Despite these increases, the index of aggregate weekly hours, which reflects the combined effect of employment and hours worked, fell 0.2% in October, although this was less than September's 0.5% decline. The annualized decline in this measure in October compared to the third-quarter average slowed to 2.4%, down from the third quarter's 3% decline and representing a further easing from the larger 7.8% and 8.9% drops in the second and first quarters, respectively.
The average hourly earnings index, the key wage measure in the report, rose 0.3% in the month, tripling market expectations for a 0.1% rise, although the year-over-year rate continued to drift down, slipping to 2.4% from 2.5% in September.
The slowing trend in quarterly job declines appears to have remained intact in the first month of the fourth quarter. Although job losses are still the norm for the U.S. economy, the steadily declining pace does indicate some easing in the labour market malaise. Still, continued job cuts are keeping downward pressure on labour incomes and have boosted the unemployment rate, which as of October was at its highest level since April 1983.
Despite the stronger-than-expected rebound in third quarter real GDP, the Fed reaffirmed its commitment, to keep the Funds rate low for an extended period, earlier this week and we expect that it will maintain this stance until demand for labour begins to pick up. The Fed's policy is also aimed at supporting the continued improvement in financial markets and will likely be needed through next year. In fact, our forecast assumes that the Fed funds rate will remain at its current very low range of 0% to 0.25% until the final quarter of 2010.
Dawn Desjardins, Assistant Chief Economist, RBC Economics Research
To view charts of today's data, go to
http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada)
http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)
RBC Economics Research contacts:
Paul Ferley, Assistant Chief Economist
Dawn Desjardins, Assistant Chief Economist
Josh Heller, Economist
Go to Financial Markets Daily (pdf) for a daily summary of U.S. interest rates and foreign exchange rates.
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View trend charts of today's U.S. releases.
