October Jobs Report: What to Watch For

The economy’s underlying strength — and its ability to shake off the lingering effects of the Delta variant of the coronavirus — will come into focus Friday morning when the government reports on hiring and employment in October.

Economists polled by Bloomberg are looking for a gain of 450,000 jobs, a big improvement from the 194,000 added in September, the year’s weakest showing. More-robust hiring at restaurants, bars and other leisure and hospitality businesses may serve as a tailwind, along with continued robust activity in white-collar sectors like professional and business services.

“I do expect to see a figure that’s much better than we saw in September,” said Greg Daco, chief U.S. economist at Oxford Economics. “The health situation has improved quite a bit.”

The Commerce Department reported last week that the economy grew by 0.5 percent in the third quarter, compared with 1.6 percent in the second quarter. Economists attributed the slowdown to the resurgent pandemic and supply chain holdups that have caused shortages of key components and have hampered manufacturers.

After the economy added more than one million jobs in July, employment growth has slowed sharply. Even though there are five million fewer jobs than there were before the pandemic, some employers are complaining of a shortage of workers, as many people remain on the sidelines of the job market. The labor force — the working-age population employed or looking for a job — actually contracted by 183,000 in September.

In theory, the demand for workers should be drawing more people into the labor force, but the participation rate is nearly two percentage points below where it was before the pandemic. Early retirements have been a factor.

A federal supplement to unemployment benefits expired in early September, and experts are watching whether the end of that assistance — and a depletion of savings accumulated from other emergency programs — increases the availability of workers.

So far, those effects have been muted, as health concerns and child care challenges have continued to affect many families. At the same time, the labor shortage has given workers a measure of leverage they’ve not experienced in recent years, contributing to wage growth.

“For the last 25, maybe 30 years, labor has been on its back heels and losing its share of the economic pie,” said Mark Zandi, the chief economist at Moody’s Analytics. “But that dynamic is now shifting.”

For many companies, the increase in labor costs is a challenge in an uncertain business environment. And lingering supply-chain troubles have meant that shipping costs — which are passed onto consumers in the form of pricier goods — remain significantly above prepandemic levels.

Still, there are reasons to be optimistic. The Federal Reserve said Wednesday that it would begin winding down the large-scale bond purchases that have been underway since the pandemic struck, signaling that it considers the economy healthy enough to be weaned from the extra stimulus.

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