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The labor report for the month of October showed improvement from the slowdown in August and September and is another data point suggesting that economic data will likely accelerate in the fourth quarter.

Last month, we discussed the decline in payroll data and noted that it was likely to be temporary as COVID cases declined. The labor report for the month of October is the first update confirming that view. Private payrolls increased by 604,000 in October, up from 365,000 in September. The prior two months were revised up by 235,000, making up for some of the weakness during the third quarter. 

Source: NDR.

Private services jobs increased by just under 500,000 (up from 265,000 in Sept), led by Leisure and Hospitality which increased by 164,000 (up from under 100,000 in the prior two months).  This illustrates the gains being made as in-person activity improves. 

Source: NDR.

Source: FRED.

One area that continues to be a concern, both in the short and long term, is the weakness in the labor force participation rate. The overall labor force participation rate remained 61.6% (compared to 63.4% in January 2020), where it has been since August 2020.      

Source: FRED.

As we have discussed before, some of this is due to older workers retiring, as the participation rate for workers over 55 continues to decline.

Source: FRED.

One area of positive labor force participation data has been prime working age (25-54) women, which improved month over month and is near the highest level since March 2020.  

Source: NDR.

Our expectation is that economic data will likely accelerate in the fourth quarter, led by a rebound in services related data.  This should flow into improved employment data in that sector, leading to positive consumer data (income, spending, and sentiment) and creating a positive feedback loop for the overall economy. 

 



 

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