Job growth decelerated to the lowest level since late 2020 during October, influenced by the aftermath of storms in the Southeast and a major labor dispute.
According to the Bureau of Labor Statistics (BLS), nonfarm payrolls rose by just 12,000 jobs this month, a significant decline compared to September, and falling short of the Dow Jones forecast of 100,000 jobs. This marks the smallest job increase since December 2020.
The unemployment rate held steady at 4.1%, aligning with expectations. Meanwhile, a more inclusive measure of unemployment, which involves discouraged workers and those in part-time jobs for economic reasons, remained unchanged at 7.7%.
The BLS indicated that the Boeing strike may have accounted for a loss of 44,000 manufacturing jobs and approximately 46,000 jobs overall.
Additionally, the report mentioned the impacts of Hurricanes Helen and Milton, but noted it was “impossible to quantify the overall effect” of the storms on employment figures. The BLS found that responses from businesses indicated that significant nonfarm payroll growth was “well below average,” the lowest in over three decades, though these figures did not factor in major disaster-related losses across affected areas.
On a positive note, average hourly wages increased by 0.4% during the month, slightly higher than anticipated but consistent with a yearly rise of 4%. The average workweek remained steady at 34.3 hours.
Despite the concerning figures, the market largely brushed aside the news, with stock futures indicating a strong opening on Wall Street as Treasury yields dropped. The subpar job numbers and wages meeting expectations are fueling speculation that the Federal Reserve will reduce interest rates again next week.
“Initially, the October jobs report suggests increasing vulnerability in the U.S. job market, but it is significantly affected by climate change and labor disruptions,” remarked Cory Stahl, an economist at Indeed Employment Lab. “While the effects of these situations are real, they are likely temporary and don’t reflect an impending collapse of the job market.”
This report arrives just days ahead of the presidential election, where polls indicate a tight race between Democrat Kamala Harris and Republican Donald Trump. In an election where the economy is a pivotal issue, the low job growth figures “cast a shadow of uncertainty” going into the following week, noted Lisa Sturtevant, chief economist at Bright MLS.
The October report also reflected a significant downward adjustment from the prior month’s figures. It was revealed that only 78,000 jobs were added in August, significantly less than the previously estimated 223,000 for September. Altogether, the revisions reduced earlier job creation tallies by 112,000 positions.
Health care and government sectors were the frontrunners in job creation, contributing 52,000 and 40,000 jobs, respectively, though some sectors experienced job declines.
Alongside the anticipated drop in manufacturing jobs, the number of temporary support roles decreased by 49,000. This sector, seen as indicative of probable employment strength, has faced a total reduction of 577,000 jobs since March 2022, as per the BLS.
Moreover, the leisure and hospitality industries saw a loss of 4,000 jobs, with the retail and transportation sectors also registering smaller drops.
The household survey, utilized to determine the unemployment rate, revealed an even larger decrease in employment figures.
This survey indicated that 368,000 fewer individuals reported having jobs, and 220,000 fewer people were active in the labor force. Full-time employment fell by 164,000, while part-time jobs decreased by 227,000.
The report highlighted how Hurricanes Helen and Milton affected the Southeast, particularly targeting areas like Florida and North Carolina, and how the Boeing strike also impacted an already slowing job market. Developments suggest that the labor dispute with Boeing may be entering its final stages.
Prior to these announcements, projections for job growth in 2024 anticipated an average creation of nearly 200,000 jobs per month, about 60,000 fewer than the previous year, yet still demonstrating steady employment growth.
Although there have been some signs of inflation pressure abating in recent months, there are concerns within the Fed that increasing interest rates could negatively affect the labor market and impede economic growth.
Thus, policymakers took remarkable steps to stimulate economic growth in September by cutting benchmark short-term interest rates by half a percentage point, a move that is double the usual quarter-point adjustment preferred by the Fed.
Market forecasts are now estimating that the central bank might reduce interest rates by a quarter point during each of its two remaining meetings this year. The Federal Open Market Committee will announce its interest rate decision next Thursday.
