Today’s report by the Labor Department that unemployment jumped from 9.8 percent in September to 10.2 percent in October suggests we have a long way to go to get to to full recovery. Despite some positive reports earlier this week, today’s data suggest that the economy will decelerate from the 3.5 percent rise in the third quarter.
While the 190,000 jobs lost last month were less than the downwardly revised 219,000 drop in September, the difference was not significant. However, the 61,000 decline in manufacturing employment, led by a 10.4 thousand decline in machinery employment, was the largest drop in four months. Because the manufacturing sector is driven broadly by consumer spending, investment spending and exports, the fact that the decline in manufacturing employment occurred across most industries shows that economic conditions are not improving significantly, and strongly suggests that much of the growth in the third quarter was due to temporary government programs.
Also, the rise of the unemployment rate to 10.2 percent will likely have a negative impact on consumer confidence, which could curtail spending in the fourth quarter.
Finally, the average weekly private-sector hours worked remained at an historic low 33 in October; that’s a harbinger of continuing weak economic conditions in the fourth quarter. Historically, the average weekly hours worked for existing employees begins to improve before new workers are added to employment rolls. Today’s report of stagnant hours worked signals slow improvement in the labor market in future months.