EconoFACTS

November 01, 2024 | 09:56

U.S. October Employment Bruised but Not Broken

Economist

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

Scott Anderson , Ph.D.

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

The fingerprints of the hurricanes and labor strikes were all over the U.S. Employment Report for October, pushing nonfarm payroll growth well below consensus forecasts. Nonfarm payroll gains slipped to a meager 12k jobs, far below nearly all analyst estimates. The BLS noted that US workers unable to work due to bad weather was a whopping 512k in October. The historical average for this month is just a tenth of that figure at 56k. The large 46k job decline in manufacturing employment was also likely due to strike activity.

There was also a sizable net downward revision to the prior two months of 112k jobs. The 3-month average of monthly job growth slipped to a modest 104k from 148k in September. Private sector payrolls actually contracted by 28k jobs in October. The job numbers are in-line with a downbeat Beige Book report for October, which described activity as little changed in nearly all districts and the labor market increasing only slightly in half the Districts and others reporting little or no change. The three-month trend of job creation is now well-below where the Fed would like to see it, increasing the odds of steady quarter-point rate cuts at the upcoming November and December FOMC meetings to close out the year.

There were some continuing signs of stability and resilience in the report, however, notably a steady unemployment rate with robust earnings growth. The unemployment rate held at 4.1% for a second consecutive month with average hourly earnings increasing a better than expected 0.4% and a solid 4.0% from a year ago. But even here, there is some reason to fret. The number of unemployed increased by 150k to 6.984 million, while household employment fell a large 368k, ending four consecutive months of gains. The duration of unemployment is also rising swiftly to 22.9 weeks from just 20.6 weeks back in July. The labor force fell by 220k, and the labor force participation rate fell to 62.6% from 62.7%. All could be symptoms of underlying labor market weakness.

Job growth weakened for both goods and service sectors last month. We saw net job losses in a number of industries including manufacturing (-46k), temporary help services (-49k), leisure and hospitality (-4k) and retail trade (-6k), as well as very little job growth in construction (+8k), information (+3k), financial services (+0k) and education and health care (+57k).

Bottom line: The jobs report was one of the first U.S. economic releases in a while to come in worse than expected. However, bad weather and large labor strikes muddy the water and make labor market weakness appear worse than it truly is. Still, the Fed’s job is to see through the noise and they will probably take some signal from the continuing labor market softening as a sign that they can continue the process of monetary normalization without much fear of igniting another bout of inflation.

Table 1 - United States — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics