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    • October jobs report shows slowing growth after major hurricanes and strikes
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    October jobs report shows slowing growth after major hurricanes and strikes

    Umito Posted on

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    Employers added only 12,000 jobs in October as hiring slowed significantly. The total was to be limited by two Southeast Hurricanes And several worker strikesbut the figure was much lower than had been estimated and job creations in previous months were revised sharply downward, raising concerns about a weakening of the labor market.

    The report paints a final portrait of the economy a few days before next week’s historic elections and key meeting of the Federal Reserve. But the temporary hurdles will likely make it difficult for Fed officials to assess the underlying health of the labor market, economists say.

    The unemployment rate remained stable at 4.1%, the Ministry of Labor announced Friday.

    Before the report was released, economists surveyed by Bloomberg estimated that 105,000 jobs were created in October.

    Also worrying: payroll gains for August and September were revised down by a whopping 112,000. August’s additions were downgraded from 159,000 to 78,000, and September’s from 254,000 to 223,000 .

    How have hurricanes affected the economy?

    Hurricanes Helene and Milton probably reduced employment last month by around 70,000 people in the Southeast, Oxford Economics estimated. Goldman Sachs expected a smaller impact, of 40,000 to 50,000 jobs. Hurricane Helene hit Florida’s Gulf Coast on Sept. 26, well before the Department of Labor conducted its employment survey, the agency noted, but Milton struck during the week of the survey.

    Across the region, the number of businesses open, employees working and hours logged have all declined by about 9%, according to Homebase, which makes employee scheduling software.

    Meanwhile, a strike in progress at Boeing — as well as small walkouts at Textron, an aerospace parts maker, and at Hilton hotels — likely eliminated payrolls by about 40,000 people, according to research firm Nomura.

    In total, the storms and strikes likely reduced job creation by about 100,000, forecasters estimate.

    There is no doubt that hurricanes and strikes have affected the paltry employment count. About 512,000 people said they could not work due to the weather, compared to a historical average of 32,000, said economist Bradley Saunders of Capital Economics. And only 47% of companies surveyed responded, a 33-year low.

    However, he also cited a slowdown in the job market.

    “The meager gain of 12,000 nonfarm jobs was much smaller than we and the consensus had expected,” Saunders said, adding that it was “only partly due to disruptions from hurricanes and the labor strike.” Boeing.

    He estimated that these temporary barriers reduced wage gains by as much as 90,000, suggesting that without them, employers would still have created only 102,000 jobs. That’s well below the average of 148,000 over the previous three months, which were also hit by hurricanes, although less devastating.

    Where is employment growing?

    The health care sector led August’s meager job gains with 52,000, while the government added 40,000. Other sectors shed jobs or added a few. Professional and business services lost 47,000 positions due to a decrease in temporary staffing positions. The manufacturing sector lost 46,000 jobs, largely due to the Boeing strike. Leisure, hospitality and construction have been mostly stable amid the storms.

    Are salaries increasing or decreasing?

    The average hourly wage rose 13 cents to $35.46, keeping the annual increase at 4%.

    As pandemic-related labor shortages have eased, wage increases have slowed. Economists estimate that annual wage growth would need to slow to 3.5% to help meet the Federal Reserve’s 2% inflation target.

    This week, another barometer of wage growth that economists say is more accurate, called the employment cost index, showed that private sector wages rose 3.8% in the third quarter, the fastest pace slowest in three years.

    How much will the Fed cut interest rates?

    Because the effects of the storms are uncertain, Barclays said before the report was released that the Fed would likely not read too much into October’s unusually low employment numbers.

    And despite concerns over the health of the labor market over the unusually low total employment numbers, Saunders said the Fed will “cut through the noise” and opt for a measured quarter-point rate cut. at a meeting next week, especially since other recent economic problems have taken place. the reports have been positive.

    In September, the Fed lowered its benchmark rate by half a percentage point – its first cut since 2020 – because inflation eased and job growth slowed sharply in August. The Fed cuts rates to boost borrowing activity and a declining economy or to return rates to normal as inflation falls. Fed officials raised rates aggressively in 2022 and 2023 as inflation hit a 40-year high of 9.1%.

    However, in September, employers created well over 200,000 jobs. And this week’s data revealed the economy grew at a healthy 2.8% annually in the third quarter as consumers continued to spend. A continued strong economy and job market could lead the Fed to suspend rate cuts to avoid reigniting inflation.

    Assuming the labor market continues to gradually calm, many forecasters believe the Fed will continue its tentative plans to cut rates by a more modest quarter-point in November, December, and at all other Fed meetings. next year.

    How is the American job market currently doing?

    More generally, employment growth has been solid despite high interest rates and inflation, with strong wage growth supporting consumption. A wave of immigrants has filled job openings and fueled more spending.

    But the flow of immigrants that underpins labor force growth is slowing, Goldman Sachs said. At the same time, the government and health care sectors, which have supported U.S. job growth for months, finally increased payrolls to a level close to where they would have been without the pandemic , Goldman said. As a result, they are now creating jobs more slowly.

    The result should be a notable decline in job creation next year at a pace that should help contain inflation while avoiding recession.

    (This story has been updated to add new information.)

    Umito
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