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Employment Report Surprise: US Adds 638,000 Jobs in October, Unemployment Falls to 6.9%

The U.S. economy added more than 600,000 new jobs last month, the Commerce Department said Friday, while the headline unemployment rate tumbled to 6.9%.

The October Employment Report showed a net gain of 638,000 new jobs, down from 672,000 in September and largely in-line with a wide consensus forecast that narrowed in to around 650,000. The headline jobless rate fell to 6.9%, the report indicated, although that figure might also reflect a larger number of Americans not currently seeking work amid ongoing coronavirus shutdowns in several U.S. states.

Average hourly earnings, however, grew by 0.1% from September to $29.50, taking the year-on-year gain to around 4.5%. Both figures, however, were shy of Street forecasts.

“With the country still fixated on election results, the latest jobs report shows the U.S. economy is rebounding quickly from COVID-related shutdowns in the spring with the unemployment already dropping below 7%,” said Tony Bedikian, head of global markets at Citizens. “Despite strong signals that many Americans are getting back to work, however, the number of coronavirus cases is rising and that may mean new restrictions on daily life that could further accelerate a shift to a more digital economy and increase calls for additional government stimulus.” 

U.S. equity futures pared declines slightly following the data release, with contracts tied to the Dow Jones Industrial Average indicating a 74 point point opening bell decline and those linked to the S&P 500 suggesting an 18 point pullback.

Federal Reserve Chairman Jerome Powell told reporters yesterday that a slowdown in the labor market was “one of the reasons why our response was so strong and so urgent at the beginning” as he referenced the Fed’s bond purchase increases and its signaling of near-zero interest rates that are likely to last until at least 2023.

“I don’t know how we could be much more vocal about it than we have been. Fortunately, the economic recovery has exceeded certainly the downside cases that we were very concerned about, and even sort of exceeded the baseline expectations,” Powell said. “Now that’s so far, we are a long way from our goals. And we’re sort of halfway there on the labor market recovery at best. And there are parts of the economy where it’s going to be hard until there’s a vaccine.”

Around 751,000 Americans filed for unemployment benefits last week, Commerce Department data indicated earlier Thursday, while a reading of private sector employment growth over the month of October from payroll processing group ADP came in well below Street forecasts at 365,000.