October Employment

A good report today from the BLS on employment in October:  the unemployment rate fell to 5.8% (from 5.9%) and employers' payrolls rose by 218,000.

The payroll figure comes from a survey of firms, while the unemployment rate is based on a survey of households (which has a smaller sample than the employer survey).  The household survey figures look even better: the number of people employed rose by 683,000, and the number unemployed fell by 267,000.  The labor force (i.e., people who are working or looking for work) rose by 416,000, which put the labor force participation rate at 62.8%, an increase from last month's historic low of 62.7%. 

The decline in labor force participation (which was at 66% in late 2007) has been one of the worrying trends of the past several years.  It partly reflects demographics, though, as the population is becoming older and a larger portion of the population is of retirement age.  Looking at the employment-population ratio for 25-54 year olds gives a picture of the labor market that takes out some of the guesswork in interpreting participation:

This ratio increased from 76.7 to 76.9 in October.  Overall, it shows some recovery over the past three years, but also gives an indication of why many Americans remain unhappy with the state of the economy - it is still less than halfway back from its low point to its pre-recession level.

Moreover, while employment is improving, wages are still growing slowly - the BLS reports that average hourly wages have increased 2% over the past year.  This suggests that there is still plenty of "slack" in the labor market.

The BLS' broader measure of un- and under-employment, 'U-6', which includes the "marginally attached" and people working part-time who want to be full-time, is at 11.5%, down from 11.8% last month (it peaked at 17.2% in April 2010).