The October employment situation report from the Bureau of Labor Statistics paints a middling picture of the labor market. The report is consistent with other recent indicators – retail sales, the ISM indexes and GDP – showing that the economy has not fallen into recession, but there is little to suggest that it is about to accelerate enough to begin absorbing the 5.9 million long-term unemployed (27 weeks and over). The report is based on two surveys. The establishment survey indicated that employers added 80,000 net new payroll jobs – 104,000 in the private sector offset by a loss of 24,000 government jobs.
The gains were broad-based. Professional and business services led with 32,000 including 15,000 temporary positions, often viewed as a prelude to full-time hiring. Education and health services, always a stalwart, added 28,000. Leisure and hospitality gained 22,000 while retail trade increased by 17,800, a sign of retailer optimism as the holiday season approaches. Weekly hours worked was unchanged at 34.3, and average hourly earnings rose by a modest 0.2 percent. The household survey revealed that unemployment ticked lower from 9.1 to 9.0 percent. Based on a different methodology, the household survey measured an employment gain of 277,000 last month. The number of employed in the household survey has increased sharply in the last three months by an average of 335,000. The household survey is based on a smaller sample and therefore more volatile than the establishment survey. Nevertheless, it could suggest the expansion of start-up businesses, which the establishment survey does not attempt to count. Overall, the outlook for slow economic growth remains intact, suggesting that interest rates will stay low indefinitely. For commercial real estate, this implies continued strong demand from investors but only a slow improvement in leasing market fundamentals.