Continued Modest Growth in Private Sector Employment

The October jobs report shows a modest improvement in private sector employment combined with continued weakness in government jobs. For the tenth consecutive month, private companies added to their payrolls. So far this year private firms have added an average of 111,000 jobs each month. This has been partly offset by an erosion of government employment. Public payrolls have shrunk an average of 24,000 a month since the start of the year, yielding a net (public plus private) job gain of just 87,000 a month. Private-sector job gains in October were faster than the recent average, and government job losses were a little slower, so the pace of net job creation improved compared with recent months.

The slow rebound in employment since last spring is clearly due to the very moderate pace of the economic expansion. If demand for goods and services produced in the United States is climbing slowly, most employers have little reason to add to their payrolls. State and local governments face a grim budget outlook. With the expiration of federal fiscal relief and little prospect that it will resume, we should expect public employment to be weak for a considerable period. Total job growth is still far too slow to put a dent in the nation’s high unemployment rate. Indeed, the unemployment rate has remained approximately unchanged at 9.6% over the past 6 months.

Recent job reports have contained good news for workers who have managed to hold on to their jobs. The average work week is slowly rising. It has inched up 0.5 hours since last December. Although nominal wage growth has been very modest, increases in the cost of living have been even slower. The combination of a longer work week and slowly rising real wages has meant that average real weekly earnings have been rising. According to the latest BLS estimates, real weekly earnings in the private sector were 2.0% higher in September than they were at the end of last year.