Job Creation Slows Down in October Amidst Storms and Labor Disputes
The US labor market experienced a significant slowdown in October, with nonfarm payrolls increasing by a mere 12,000, the lowest gain since December 2020. This figure is sharply down from September and below expectations. The unemployment rate, however, remained steady at 4.1%, in line with forecasts.
Storms and Labor Disputes Take a Toll
The Bureau of Labor Statistics attributed the weak job growth to the impacts of hurricanes Helene and Milton, which hit the Southeast, as well as a significant labor impasse, including the Boeing strike. The strike alone is estimated to have subtracted 44,000 jobs from the manufacturing sector, which lost 46,000 positions overall.
Wages and Work Hours Remain Steady
Average hourly earnings increased by 0.4% for the month, slightly higher than expected. The 12-month gain remained at 4%, in line with forecasts. The average work week held steady at 34.3 hours.
Markets React Positively Despite Weak Jobs Report
Despite the disappointing jobs numbers, stock market futures surged, and Treasury yields plummeted. The weak jobs report, combined with wages that are in line with expectations, increases the likelihood of an interest rate cut from the Federal Reserve next week.
Economists Weigh In
According to Cory Stahle, an economist at the Indeed Hiring Lab, “October’s jobs report paints a picture of growing fragility in the U.S. labor market, but under the surface is a muddy report roiled by climate and labor disruptions.” Lisa Sturtevant, chief economist at Bright MLS, noted that the light jobs number “casts a murky shadow heading into next week.”
Revisions and Sector Performance
The weak October report included substantial downward revisions from previous months, with August revised down to a gain of 78,000 and September’s initial estimate cut to 223,000. Health care and government led job creation, adding 52,000 and 40,000 positions, respectively. However, several sectors saw job losses, including manufacturing, temporary help services, leisure and hospitality, retail trade, and transportation and warehousing.
Household Survey Paints a Bleaker Picture
The household survey, used to calculate the unemployment rate, showed an even weaker hiring picture, with 368,000 fewer people reporting jobs and the labor force contracting by 220,000. Full-time employment declined by 164,000, while part-timers fell by 227,000.
Implications for the Economy
The report raises concerns about the labor market and the ongoing economic expansion. Prior to the release, job creation had averaged close to 200,000 a month during 2024, about 60,000 below the pace for the same period a year ago. The Federal Reserve has taken steps to mitigate the impact of elevated interest rates on the labor market, and financial markets are pricing in a strong likelihood of further rate cuts.
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