Headline Job Gains Fall Short of Expectations
The monthly employment report, released by the Bureau of Labor Statistics (BLS) on the first Friday of each month, is closely monitored by economists, investors, and policymakers alike. While headline numbers often capture the spotlight, a deeper dive into the data can reveal nuanced insights. The October 2024 jobs report, published just days before the U.S. presidential election, offers a complex picture of the labor market. Hurricanes, strikes, and ongoing economic headwinds are all factors that contributed to a weaker-than-expected job growth figure, raising questions about the strength of the U.S. economy heading into a pivotal election week.
October saw a mere 12,000 jobs added to the U.S. economy, a figure that fell far below the 110,000 jobs that economists had anticipated. This weak result has heightened concerns about an already uncertain economic outlook. Furthermore, revisions to previous months' data have intensified worries. Payroll gains for August and September were revised downward by a total of 112,000 jobs, signaling a troubling trend. In August, job additions were slashed from 159,000 to 78,000, while September’s tally dropped from 254,000 to 223,000.
The reasons behind this sharp downturn are multifaceted. Economists note that hurricanes Helene and Milton, which impacted the Southeast in late September and early October, disrupted business operations and worker availability. Oxford Economics estimated that these natural events reduced job growth by approximately 70,000 positions, while Goldman Sachs forecasted an impact between 40,000 and 50,000 jobs. Adding to these challenges was an ongoing strike at Boeing, which affected thousands of jobs within the manufacturing and transportation sectors. Combined, these factors likely shaved 100,000 jobs off the total, according to economic forecasts.
A Widening Discrepancy Between Surveys
The October report revealed a striking discrepancy between the two primary sources of employment data: the Establishment Survey, which tracks nonfarm payrolls, and the Household Survey, which assesses employment from a more personal, household-level perspective. This month, the Household Survey painted an even bleaker picture than the headline numbers, showing a loss of 368,000 jobs, far worse than the payroll figures. This divergence between the two reports has persisted all year, reaching a record gap. The Household Survey now represents only about 18.4% of the total jobs reported in the Headline Report, suggesting a structural inconsistency in labor market measurements.
Sector-by-Sector Losses
Breaking down the data by sector, the October report reveals that Professional Business Services and Manufacturing were among the hardest hit. The Professional and Business Services sector shed 47,000 jobs, largely due to a reduction in temporary staffing positions. Manufacturing also took a hit, losing around 46,000 jobs, with Boeing’s ongoing strike being a significant contributor. Health care was a rare bright spot, with gains of 52,000 jobs, while government hiring added 40,000 positions. Leisure, hospitality, and construction sectors saw little movement, hindered by the combined effects of recent storms and a weaker hiring environment overall.
Over the last year, the trend in job creation has shown noticeable declines, with each category falling below the 12-month average in October. The labor force participation rate, a measure of those actively working or seeking work, remains below pre-2008 crisis levels, slipping further to 62.6% this month. This highlights the ongoing challenge of encouraging more people to return to or stay in the workforce.
Examining Birth/Death Adjustments
Another factor skewing this month’s employment figures is the BLS's “birth-death” model, which estimates jobs created or lost due to new business formations or closures. In October, the BLS assumed an addition of 368,000 jobs from this model. Despite this sizable estimate, the total reported increase in payroll jobs was just 12,000. Over the past year, birth-death adjustments have contributed disproportionately to reported job gains, suggesting that real-world job growth may be more sluggish than indicated by headline data.
Wage Growth Remains Stagnant
Average hourly earnings increased by 0.4% from the previous month, bringing the year-over-year wage growth to 4%. While this figure aligns with Wall Street’s expectations, it shows a slowing pace of wage increases, a sign that the post-pandemic tightness in labor supply is easing. The recent Employment Cost Index, which economists consider a more accurate wage barometer, reported private sector wages rising at an annual rate of 3.8% in the third quarter, the slowest growth in three years. Economists have suggested that wage growth should slow to around 3.5% to help achieve the Federal Reserve’s 2% inflation target.
Implications for the Federal Reserve
The October employment report arrives just before the Federal Reserve’s upcoming meeting, where officials are anticipated to cut interest rates by 0.25% in light of cooling inflation and a slowing job market. However, given the temporary impacts of hurricanes and the Boeing strike, analysts predict that the Fed will view October’s weak job numbers as an outlier. The central bank has already reduced rates in September, citing the dual impact of slowing inflation and weak job growth as justification for a rate cut. With consumer spending and economic growth still robust — GDP grew at an annualized rate of 2.8% in the third quarter — the Fed is expected to proceed cautiously.
Election Implications and Broader Economic Outlook
With the election just days away, the October jobs report has implications for both major candidates. Former President Donald Trump’s campaign has seized upon the weak employment data, framing it as evidence of poor economic management by Vice President Kamala Harris, the Democratic candidate. Meanwhile, Harris's camp has highlighted the temporary disruptions caused by storms and strikes, arguing that the economy remains fundamentally strong. Economic issues, particularly inflation and wage growth, are top concerns for voters, with Trump enjoying a slight lead in public opinion polls on handling the economy.
A notable detail is that, despite high inflation, strong wage gains continue to support consumer spending, sustaining overall economic growth. However, the influx of new workers, bolstered by higher immigration rates, has kept labor force numbers stable, helping meet consumer demand. Goldman Sachs warns that a slowdown in immigration could curb future labor force growth, potentially slowing the economy.
The October 2024 jobs report reflects a mixed economic landscape, marked by weak job growth, wage stagnation, and significant disruptions from natural disasters and labor strikes. While underlying economic indicators suggest resilience, the broader labor market appears to be cooling, a trend that will likely continue into the coming year. With voters heading to the polls and the Federal Reserve meeting to decide on rates, the report’s complexities underscore the challenges ahead for both policymakers and the next president. The current labor market, while robust, faces numerous pressures, with future economic stability dependent on navigating both domestic challenges and global uncertainties.
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