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October Jobs Report Arrives Ahead of Election Day

As the Washington Post reports, the final jobs report that will be released before the 2016 presidential election arrived today, bringing some mostly positive but slightly mixed news. The good: the U.S. economy added 161,000 jobs last month. The bad: that’s slightly less than the 173,000 jobs that economists had expected based on the average monthly gains over of the past year. Regardless of the miss, the unemployment rate fell from 5% to 4.9% as a result. It is also worth noting that job reports for August and September have been revised upward, totaling an extra 44,000 jobs previously overlooked.

While the number of new jobs may have been slightly overestimated, wage growth exceeded expectations. Average hourly earnings in the private sector grew 2.8% in October when compared to the year prior. This marks the largest increase the United States has seen in seven years. 

After taking a pass on raising interest rates earlier this week, there is now widespread consensus that these new figures will be enough to convince the Fed otherwise come December. As chief U.S. economist at High Frequency Economics, Jim O’ Sullivan, told the Post, “We’re increasingly seeing evidence that the labor market is tight enough to put some upward pressure on wages and inflation generally as well. The message generally from this is that the Fed probably won’t want the unemployment rate to go a lot lower.” Of course a lot can happen between now and the end of the year, especially with a contentious election only a few days away. Depending on the poll results that pour in on Tuesday and what the markets make of them, there is always the chance the Fed might elect to wait until things stabilize once again. For example analyst Mark Hamrick said the Fed could worry about “financial markets volatility, not unlike what happened after the Brexit vote.” 

Back to cheerier subjects that look beyond November 8th, the wage growth and jobs numbers are good news for retailers as we head into the holiday shopping season. In fact the National Retail Federation (NRF) says it anticipates November and December sales to rise 3.6% over last year and reach $655.8 billion (not including auto sales, gas, or restaurants). Such an increase would best the 10-year growth average of 2.5% as well as the 3.4% average seen since recovery began in 2009.

Overall the October jobs report adds some ammo to both presidential camps as we head into the final stretch. On the one hand Secretary Hillary Clinton could highlight it as another example of how Democratic policies under President Barack Obama have helped bring the nation back from the verge of disaster. Meanwhile Republican challenger Donald Trump may argue that recovery has taken too long, recent growth has been slowing, or that the economy is positioned atop another bubble that is getting ready to burst — something he’s mentioned in the past. With just four more days left in the craziest election cycle in recent memory, what will happen with the markets, economy, and our country at large next is really anyone’s guess.

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