U.S. job growth regains momentum; worker shortages persist

WASHINGTON, Nov 5 (Reuters) – U.S. employment increased more than expected in October as the headwind from the surge in COVID-19 infections over the summer subsided, offering more evidence that economic activity was regaining momentum early in the fourth quarter.

The Labor Department’s closely watched employment report on Friday still showed, however, that worker shortages persisted even after federal government-funded unemployment benefits expired in early September and schools fully reopened. The labor force participation rate was flat.

Still, the broad-based gain in employment added to rising consumer confidence and services sector activity in painting a more favorable picture of the economy, after the Delta variant of the coronavirus and economy-wide shortages of goods restricted growth in the third quarter to its slowest pace in more than a year.

“The one cloud on the horizon was the stubbornly depressed participation rate,” said Seema Shah, chief strategist at Principal Global Investors. “At this point, with reduced benefits, a return to in-person schooling and the drop in COVID rates, we should be seeing a recovery in participation.”

Nonfarm payrolls increased by 531,000 jobs last month, the survey of establishments showed. Data for September was revised higher to show 312,000 created instead of the previously reported 194,000. Economists polled by Reuters had forecast payrolls rising by 450,000 jobs.

Employment is 4.2 million jobs below its peak in February 2020. Job growth has averaged 582,000 per month this year.

Leisure and hospitality businesses led the increase in hiring last month, with 164,000 jobs created. Payrolls also rose in the professional and business services, transportation and warehousing, healthcare, wholesale trade, financial activities as well as mining sectors.

Manufacturing added 60,000 jobs, with 28,000 of the positions at motor vehicle manufacturers. Construction payrolls increased by 44,000 jobs.

But state and local government education shed 65,000 jobs. The government said pandemic-related staffing fluctuations in education have distorted normal seasonal patterns, making the changes in employment in the sector challenging to interpret. Shortages of bus drivers and other support staff have been well documented. Overall government payrolls fell by 73,000 jobs.

U.S. stocks opened higher. The dollar rose against a basket of currencies. U.S. Treasury prices were mixed.

MILLIONS REMAIN HOME

Details of the smaller survey of households were also upbeat, with strong employment gains. The unemployment rate fell to 4.6% last month from 4.8% in September. Though 104,000 people entered the labor force last month, millions remained outside, making it harder for employers to fill 10.4 million jobs which were open as of the end of August.

The labor…