The economy added just 12,000 jobs in October, the lowest in years thanks to temporary shocks
U.S. job creation slumped in October as the economy faced hits from hurricanes and a massive work stoppage at Boeing (BA).
Nonfarm payrolls increased 12,000, down considerably from a downwardly revised 223,000 jobs created in September, according to data from the Bureau of Labor Statistics (BLS) released Friday. Analysts had estimated the U.S. would add about 120,000 jobs last month, data compiled by FactSet (FDS) showed.
October job creation also plunged from an average monthly gain of 194,000 during the past 12 months, the agency said.
Hurricanes Helene and Milton, which struck the southeast U.S. in late September and early October, contributed to job losses, particularly in temporary help services. The ongoing strike by 33,000 Boeing machinists also temporarily hit manufacturing payrolls — and will continue to do so as the strike drags on. (Boeing and the union representing the striking machinists reached a new contract deal late Thursday that could end the work stoppage, which has been costing the troubled aerospace giant millions of dollars a day.)
The BLS said manufacturing employment decreased by 46,000 in October, of which 44,000 came from transportation equipment manufacturing as a result of the Boeing machinists’ strike. Similarly, employment in temporary help services declined by 49,000 on the heels of the hurricanes.
The unemployment rate held steady from last month at 4.1%, in line with economists’ expectations.
“The big one-off shocks that struck the economy in October make it impossible to know whether the job market was changing direction in the month, but the downward revisions to job growth through September show it was cooling before these shocks struck,” said Comerica Bank (CMA) chief economist Bill Adams.
An onslaught of economic data this week showed signs of a softening labor market. Job openings fell to their lowest level since January 2021 in September, with 7.44 million jobs open at the end of the month — a decrease from a downwardly revised 7.86 million in August, the BLS Job Openings and Labor Turnover Survey, showed Tuesday.
Meanwhile, inflation measured by the Bureau of Economic Analysis’ Personal Consumption Expenditures (PCE) index slowed to an annual rate of 2.1% in September, the agency said Thursday, down from 2.3% the month before and in line with analysts’ expectations. That data on the Federal Reserve’s preferred inflation gauge shows inflation well on its way to the central bank’s annual target of 2%.
Despite the drop, core PCE — excluding food and energy — was still 2.7%. The U.S. economy grew less than expected at an annualized rate of 2.8% in the third quarter, the Bureau of Economic Analysis said Wednesday.
With the Federal Reserve’s next interest rate decision coming next week, Bankrate senior economic analyst Mark Hamrick said the central bank likely won’t hinge its next move too heavily on the recent information.
“The Federal Reserve is mindful that incoming data, including the monthly jobs report, risks being whipped around by temporary factors,” Hamrick said. “It is generally a good practice not to make too much of out of one month’s data.”
For now, he believes the most likely path for the FOMC will be to make a quarter-point cut at the Nov. 7 meeting and again at its Dec. 18 meeting. “The Fed is walking a tightrope between the goals of its dual mandate, maximum employment and stable prices,” he said.
Charlie Ripley, senior investment strategist for Allianz Investment Management (ALV), said it’s difficult to pull any economic signals from October’s report.
“On balance, there isn’t much to take away from this report to ascertain the trajectory of the labor market, which leaves the Fed on track to cut 25 basis points next week,” he said. “However, it appears that we are going to have to wait for another month of economic data to better gauge a prescribed path of monetary policy from the Fed.”
Instead, Comerica’s Adams believes the Fed will be looking at the downward revisions of September and August jobs figures, which “confirm that the labor market has cooled, and will reinforce the Fed’s view that there are equal risks to their maximum employment mandate as to their mandate for stable prices,” he said.
