Yes, the jobs report was strong, and yes, there had been a bit of caution coming into the Friday report on the heels of the General Motors strike.
It’s worth mulling the good news, and then digging deeper to see what can be improved.
In terms of the headlines, 128,000 jobs were added in October, per data from the Labor Department, handily outpacing the roughly 85,000 that had been expected. The unemployment rate stood at 3.6 percent. In terms of other high-level statistics, average hourly earnings were up 3 percent in the month as measured year over year.
In addition, the estimates of job growth in August and September were revised upwardly by 95,000 jobs.
It should be noted that the GM strike dragged down the October numbers by at least a bit, because tens of thousands of striking workers were off the employment roster. Still, the net gains, as noted above, were better than expected.
The fact that businesses are willing to hire means the headlines surrounding trade wars and disrupted supply chains are not having a dampening effect, at least not yet. And perhaps hiring was strong on the news that China and the U.S. have entered the beginnings of some trade resolutions.
Job gains are now into their 109th straight month.
The slowdown is there, however, as the job growth is now markedly under the 200,000-plus pace seen just a few years ago. In addition, the U.S. economy grew at an annualized 1.9 percent pace in the third quarter, which is slower than the 2 percent seen previously.
At least on Friday (Nov. 1), there seemed to be a sigh of relief as stocks soared. And in comments to The New York Times, per Michael Gapen, chief United States economist for Barclays, the jobs report “helps reduce the concern that the slowdown was becoming more broad-based and recession risks were right around the corner. I think most people have a slightly more positive view of the U.S. economy now than even two or three weeks ago.”
Drilling down into the data a bit, the services sector added almost half of those net new positions, at 50,000.
The data signals that things are humming along, not soaring – at least on the jobs front. That’s important because employment can be thought of as the engine that drives the economy. We’re talking about consumer spending, of course.
Here are a few other thoughts: If employment is tight, wages are up and businesses are continuing to hire, all of this throws into stark relief what is NOT working.
Consider the fact that, as we reported in this space in September through the SMB Receivables Gap: The Business Impacts of Trade Credit Playbook, $3.1 trillion is the amount that U.S. firms have suspended in accounts receivable. And the impact is especially significant for the very firms that would create even more jobs (and reduce unemployment even further) if managing cash flow were not such a challenge. We reported in the Playbook (done in collaboration with Fundbox) that as many as 31 percent of early-stage, low-margin firms experience routing cash shortfalls. We also noted in the The Trade Credit Dilemma Report that 27.5 percent of firms that are paid late pay their own suppliers late, which creates a negative ripple effect up and down supply chains.
The logic follows that if those firms were able to take advantage of trade credit (getting paid more quickly in return for discounted terms) through online platforms or other means to cover shortfalls as they wait for receivables, they would have higher margins and more predictability, and would expand. As they expand, of course, they’d need more staff and … a virtuous cycle develops.
Unlock the money, and you unlock even more economic potential.