Manufacturing employment changed little in October, falling by 7,000. For the year so far, manufacturing employment has increased by 135,000. However, 99 percent of this increase took place during the first five months of the year, when the fiscal stimulus and inventory rebuilding were providing growth to industry.
Since May, manufacturing employment has been essentially flat, edging up just 1,000. This indicates that in the wake of these mostly-expired supports for growth, the underlying strength of the recovery has weakened, causing firms to put off hiring plans.
The good news in the report is that the private sector added 159,000 jobs in October, the fourth improvement in the past five months and the single largest increase since April. While the improvement has been gradual, the fact that private sector job growth has been on the rise discounts the likelihood of a double-dip recession in the near-term.
And while the increase in employment has not been strong enough to reduce the unemployment rate, it is important to keep today’s number in perspective — a year ago the economy shed 224,000 jobs.
The economy will have to create a significantly higher number of new jobs for the unemployment rate to decline. In addition, after two months of increases, the labor force actually declined in October as discouraged workers stopped searching for work. Had these unemployed workers remained in the workforce, the unemployment rate would have increased to 9.8 percent last month. The chance of the unemployment rate increasing as workers eventually re-enter the workforce is very high. This could depress consumer confidence and keep the recovery in low gear over the next several quarters.