The U.S. Employment situation continued to improve last month, as October Nonfarm payrolls increased 531,000, beating consensus expectations were for a 413,000 improvement. Additionally, the September and August numbers were revised higher, 312,000 up from 194,000 and 483,000 up from 366,000 respectively. The unemployment rate dropped to 4.6%, better than the anticipated 4.7%. Average hourly earnings increased 0.4% meeting expectations, after a .6% increase in September. By nearly every measure the October print was a welcomed surprise.
One area, which continues to be a cause for concern, is the labor force participation rate, which remained constant at 61.6%, below the January 2020 high of 63.4%. Despite a steady increase in hourly earnings and the elimination of much of the pandemic stimulus, people have still not returned to work, as many economists anticipated. There’s much speculation about the causes of this phenomenon, health concerns, childcare issues, retiring Baby Boomers, and lower immigration rates. Whatever the cause, the result is an estimated 1.2 million people out of the U.S. labor force, which begs the question: what will it take to bring people back to work? If the answer is even higher wages, then recent inflationary pressure may not be transitory.
What does all this mean for Small Business Owners?
If you’re planning to hire new workers or having trouble filling open positions with quality candidates, you may have to increase starting salaries. If that’s the case for you, you should also consider increasing your prices. Failing to do so, could be a strain on your business.