Richard Clement | Reuters
Construction workers move materials at a work site for a new condominium and retail complex in Portland, Oregon.
The unemployment rate in October fell to 4.1 percent, a 17-year low, from 4.2 percent, but economists point to a decline in the participation rate of 0.4 to 62.7 percent as the cause. Wage growth was flat after a surprise 0.5 percent gain last month.
“We just had a lot of people drop out of the labor force. The size of the labor force fell 765,000. … It looks to me like a lot of seasonal workers probably fell out this month, and that explains the participation rate,” said Ward McCarthy, chief financial economist at Jefferies.
McCarthy said the number of workers that joined the workforce in September was unusually high. “I think you should look at the two [months] combined which gives you a pretty solid, steady state.”
Stocks barely budged after the report, and the 10-year yield and 2-year yields held steady. The 2-year, at 1.61 percent, is the most responsive to Fed rate hikes, and traders said it was indicating no change in view on the Fed’s expected December rate hike.
“Both the September and October numbers were too storm-damaged to put a whole lot of weight on them. From a big picture standpoint, these numbers largely met what I expected,” said McCarthy. “I think we’ll see them revert back to trend with the release of the November report next month.”
Cathy Barrera, chief economist at ZipRecruiter, said she is watching that decline in participation among prime-age workers, 25 to 54, another measure that could be distorted by the impacts of hurricanes Harvey and Irma. The participation rate for that age group fell to 81.6 from 81.8 percent.
“This is something I want to take a look at next month,” said Barrera. “This could be a blip. …From September 2015, there’s been a steady increase in the labor force participation rate of these prime-age people.”