GM General Motors Company

By Eric Morath 

WASHINGTON -- The U.S. economy has cooled but continues to expand with employers hiring, consumers spending and growth stabilizing.

Employment grew by a seasonally adjusted 128,000 jobs in October, the Labor Department reported Friday, a solid performance considering a strike at General Motors plants and a decline in the federal workforce temporarily reduced payrolls by more than 50,000.

The unemployment rate ticked up from a 50-year low to 3.6% in October as hundreds of thousands of Americans joined the labor force. Wage growth remained steady, up 3% from a year earlier.

Friday's figures also showed job growth was stronger in August and September than previously reported. That and other economic news point to a U.S. economy that is growing at a stable but slower rate compared with 2018, despite signs of global slowdown.

"The U.S. economy is in a good place," Federal Reserve Vice Chairman Richard Clarida said in a speech Friday afternoon. "Growth has been supported by the continued strength of household consumption, underpinned, in turn, by a thriving labor market."

The Fed this week cut its benchmark interest rate for the third time since July in an attempt to stimulate the economy and signaled it was done cutting rates unless it sees a significant slowing of economic activity. After Friday's report, JPMorgan Chase and Barclays economists removed a projected fourth interest-rate cut in December from their forecast.

Corporate profits have been better than expected, and economic growth has returned to the 2% trajectory that marked most of the expansion before the tax cuts passed in late 2017. Growth has slowed from a 3% rate in the middle of last year, but new data this week suggests recession risks remain low.

Stocks climbed Friday after the October jobs figures comforted investors about U.S. growth.

U.S. employers overall have added to payrolls for 109 straight months, by far the longest stretch of consistent job creation on record to 1939. Employers added an average 167,000 jobs to payrolls each month this year. That is a slowdown from the 223,000 jobs added each month, on average, last year, and on pace to be the worst year for job creation since 2010.

But job growth remains strong in areas of the economy that serve U.S. consumers and are generally shielded from global trends and trade disputes. Health care and social services added 34,200 jobs in October, business services added 22,000, and hospitality, including restaurants, added 61,000.

Outside the automotive sector, which was cutting jobs even before the GM strike, manufacturers have added more than 100,000 jobs in the past 12 months. While less than half as many as the prior 12 months, continued growth points to a cooling, not collapsing, factory sector.

With the unemployment rate low and the economy in a decadelong expansion, diners are as hungry as ever for tacos, said Michael Mabry, chief development officer of Fuzzy's Taco Shops, a Fort Worth, Texas chain of 150 restaurants in 17 states. The company is planning to add between 15 and 20 locations by the end of next year, an expansion that would create several hundred new jobs, Mr. Mabry said.

"The industry itself is stable, and our company is having some pretty good months, so it's stacking up to be a pretty good year," he said, but added that finding and retaining workers can be challenging. The firm's restaurants are trying to become more efficient by redesigning kitchens to reduce the number of prep cooks and combining bartender and cashier jobs during slower periods of the day, he said.

October's hiring was consistent with recent trends, after accounting for two anomalies last month.

Employment in auto manufacturing fell by 41,600 "reflecting strike activity," according to the Labor Department. The 40-day GM strike ended last week, but the government didn't count those workers on payrolls in October because they were on picket lines the week of the employer survey. The federal government shed 17,000 jobs because many temporary workers completed their jobs for the 2020 census. The Census is planning to add a half-million temporary jobs next year.

Still, with the economy clearly downshifting from 2018, some U.S. employers are acting cautiously.

Melissa Ball, owner of Ball Office Products, is holding staffing steady at her 30-person company in Richmond, Va.

"We have a good sense of comfort right now but not a lot of long-term security," she said. Tariffs led to higher prices for some products, she said. More generally, Ms. Ball said she is preparing for a slowdown after some strong years. "I'm not going to hire someone that I don't feel really confident about their employment prospects with us for a long time," she said.

The unemployment rate last month rose in part because more Americans joined the labor force, a positive sign.

The share of Americans working or searching for work rose last month to the highest level since August 2013, hinting the labor market is drawing some Americans off the sidelines. Participation among those in their prime working years, between 25 and 54, touched a 10-year high.

Wage growth has largely plateaued despite a low unemployment rate; historically, wages are pushed up when workers are in short supply. Average hourly earnings for private-sector workers increased 6 cents to $28.18 an hour.

Wages last year accelerated to grow at better than a 3% rate from a year earlier for the first time in a decade. Since peaking at a 3.4% increase in February, pay increases have eased somewhat. The gains well outpace inflation, but are modest relative to other periods with historically low unemployment. That suggests many businesses are reluctant to boost wages enough to poach workers from competitors. Some maybe turning to benefits, such as offering remote work or additional vacation, to attract employees.

Nick Timiraos contributed to this article.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

November 01, 2019 14:44 ET (18:44 GMT)

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