In October, US job creation significantly lagged behind Wall Street's projections amidst a persistent Boeing strike and the aftermath of hurricane disruptions. Government data released on Friday revealed a mere 12,000 increase in total nonfarm payrolls, starkly below the anticipated 100,000 gain based on a Bloomberg survey.
This employment uptick marks the weakest performance since December 2020, highlighting the challenges faced in the current labor market. Further examination indicated that the previous month's figures were also revised downward, with September's job gains adjusted by 31,000 to 223,000 and August's by 81,000.
The unemployment rate remained steady at 4.1% in October, aligning with market expectations. ‘Given the ongoing impacts of the Boeing strike and the destructive nature of hurricanes Helene and Milton, we anticipated a complicated employment report,’ stated Thomas Feltmate, Senior Economist at TD Economics.
‘Yet, due to the multifaceted influences on last month’s statistics, it remains premature to derive any substantial insights from this report.’ The manufacturing sector experienced a notable decline, shedding 46,000 jobs, primarily due to a 44,000 reduction in transportation equipment manufacturing linked to strike activity, as reported by the Bureau of Labor Statistics (BLS).
Overall, the goods-producing sector lost 37,000 positions. Hurricane Helene made landfall on Florida's Gulf Coast towards the end of September, followed by Hurricane Milton, which struck Florida on October 9, coinciding with the reference periods necessary for the household and establishment surveys, according to the BLS. The BLS noted, ‘While it is likely that payroll employment estimates within certain industries were influenced by the hurricanes, quantifying the net effect on the overall monthly changes in national employment, hours, or earnings estimates is not feasible since the establishment survey is not tailored to isolate the impacts of extreme weather events.’ Private payrolls decreased by 28,000 in October, diverging sharply from the consensus expectation of a 70,000 increase.
This marked the first decline in private-sector payrolls since December 2020, said Nancy Vanden Houten, lead US economist at Oxford Economics, in correspondence with MT Newswires. The service sector reported a modest gain of 9,000 jobs, a considerable drop from the 169,000 increase reported for September. Average hourly earnings witnessed a 0.4% sequential growth, slightly surpassing the projected 0.3% increase anticipated by analysts.
Year-over-year, earnings improved by 4%, aligning with market forecasts. The October employment report is perceived as a signal of relief rather than concern by the Federal Reserve. Jefferies US Economist Thomas Simons remarked that the central bank is likely to implement a 25-basis-point rate cut in the upcoming meetings in December.
This follows a 50-basis-point reduction in the benchmark lending rate in September. Simons added, ‘The resilience of gross domestic product as well as personal income and spending in recent months—combined with the initial assessment of September payrolls—has led markets to price in a greater likelihood of a pause in policy at one of the next two meetings.
Nonetheless, this situation should afford the Fed sufficient leeway to maintain their previously established trajectory in the most recent Summary of Economic Projections.’.