The U.S. labor market picked up steam in October, according to government data released Friday morning, adding 271,000 jobs after several months of disappointing growth.
The number blew past analysts’ expectations. The unemployment rate dipped to 5 percent.
More than six years after the recession ended, the job market is nearing a full recovery. The jobless rate peaked at 10 percent in 2009 and is now closing in on what many economists believe is its lowest sustainable level.
Still, the number of people working part-time who would prefer full-time positions remains unusually high and wage growth has been stagnant. The share of people participating in the labor force has fallen to the lowest levels in three decades. Though much of the decline is due to demographic changes, many workers have become so discouraged about their prospects of finding a job that they’ve given up the search.
Declining unemployment and a smaller workforce mean that the economy does not need to add a large number of jobs each month in order to tread water. Jim O’Sullivan, chief U.S. economist at High Frequency Economics, estimated that hiring would only need to clock in at 59,000 jobs a month over time to keep the unemployment rate steady. He forecast the economy would add 210,000 jobs in October.
Progress in the job market is a key factor in the Federal Reserve’s decision whether to raise its target interest rate this December for the first time in nearly a decade. The central bank cut its rate to zero during the 2008 financial crisis and has kept it there ever since in hopes of fostering a stronger recovery.
The Fed has repeatedly said that it expects to finally begin pulling back its support this year by lifting its target for interest rates if the recovery keeps chugging along as expected. Inflation has been running below the Fed’s goal of 2 percent, which is generally considered consistent with a healthy economy. But officials generally believe that strong hiring will eventually push prices back up.
“I think the case for liftoff will continue to firm up,” Atlanta Fed President Dennis Lockhart said in a speech Thursday.
The biggest risk to the recovery in the United States comes from overseas. China has acknowledged that the breakneck expansion that helped buoy the global economy after the financial crisis is no longer sustainable. The country lowered its target for annual growth over the next five years from 7 percent to 6.5 percent.
Fears over China’s ability to engineer a smooth transition set off wild swings in global financial markets over the summer, including a 1,000-point drop in the Dow Jones industrial average. Prices for oil and other commodities have plunged as a result of weak demand overseas, forcing the manufacturing and oil industries to shed thousands of jobs.
But Fed officials believe the ripple effects have not extended much further. Financial markets have calmed down, with the Dow now back in the green for the year. Consumer spending has remained robust, while the housing market has continued its slow recovery.
“At this point, I see the U.S. economy as performing well,” Fed Chair Janet Yellen said Wednesday during testimony on Capitol Hill.