In October, the US economy added 638,000 jobs, slightly less than September and the lowest level added since the jobs recovery began in May. Unemployment dropped a full point to 6.9%, but some of that came from an exit of 541,000 from the labor force:

Total nonfarm payroll employment rose by 638,000 in October, and the unemployment rate declined to 6.9 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined. …

In October, the number of long-term unemployed (those jobless for 27 weeks or more) increased by 1.2 million to 3.6 million, accounting for 32.5 percent of the total unemployed. By contrast, the number of unemployed persons jobless 15 to 26 weeks decreased by 2.3 million to 2.6 million, and the number of persons jobless 5 to 14 weeks decreased by 457,000 to 2.3 million. The number of persons who were jobless less than 5 weeks was about unchanged at 2.5 million. (See table A-12.)

The labor force participation rate increased by 0.3 percentage point to 61.7 percent in October; this is 1.7 percentage points below the February level. The employment-population ratio increased by 0.8 percentage point to 57.4 percent in October but is 3.7 percentage points lower than in February.

This in particular looks like a red flag:

The number of persons employed part time for economic reasons increased by 383,000 to 6.7 million in October, after declines totaling 4.6 million over the prior 5 months. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. This group includes persons who usually work full time and persons who usually work part time.

That could be caused by new COVID-19 restrictions imposed by states and local authorities as positive cases rise sharply. Regardless of the cause, the shift of more people to fewer hours will mean less consumer activity — both by the partially sidelined employees and at the businesses for which they work. The Household survey captured some of this churn, and the good news is that it wasn’t quite as bad as in September:

In October, 15.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic—that is, they did not work at all or worked fewer hours at some point in the last 4 weeks due to the pandemic. This measure is down from 19.4 million in September. Among those who reported in October that they were unable to work because of pandemicrelated closures or lost business, 11.7 percent received at least some pay from their employer for the hours not worked, up from 10.3 percent in September.

About 3.6 million persons not in the labor force in October were prevented from looking for work due to the pandemic. This is down from 4.5 million in September. (To be counted as unemployed, by definition, individuals must either be actively looking for work or on temporary layoff.)

Nevertheless, overall new hiring has tailed off, as we already know from the weekly initial jobless claims data. Current levels of new job additions would look fantastic, but we are still millions of jobs short from where we started at the beginning of the pandemic. We should be expecting higher growth if (a) we had the pandemic under better control, and (b) we had enough support for payrolls to help businesses deal with government-imposed restrictions on commerce.

On the plus side, both wages and hours increased this month. That’s a sign of progress, especially in manufacturing, where overtime went up by two-tenths of an hour to 3.2 hours per week. Manufacturing might have an easier ramp-up after having to invest heavily in social-distancing equipment and processes earlier this year, whereas retailers are more vulnerable to policy changes on economic activity from state and local governments.

CNBC heralds this as better than expected — which is true, as far as it goes:

Employment growth was better than expected in October and the unemployment rate fell sharply even as the U.S. faces the challenge of surging coronavirus cases and the impact they could have on the nascent economic recovery.

The Labor Department reported Friday that nonfarm payrolls increased by 638,000 and the unemployment rate was at 6.9%. Economists surveyed by Dow Jones had been looking for a payroll gain of 530,000 and an unemployment rate of 7.7% a touch lower than the September level of 7.9%.

The jobless rate decline was positive as it came with a labor force participation rate that rose 0.3 percentage points to 61.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons also declined, to 12.1% from 12.8% a month ago. …

October’s growth brings the total payroll gains since May to around 12 million, though that still leaves unfilled about 10 million positions lost in March and April.

It’s not a bad report, but it’s a sign that the job creation momentum is slowly evaporating, and too soon to get back to normal in the short run. If Congress starts paying more attention to the metrics than the polls, it might decide to provide one more round of stimulus to goose that momentum for another six months — by which point vaccines might eliminate the rest of the risk from the pandemic and from economic activity within it.