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Hurricanes, strikes dampen U.S. job growth as Americans prepare to vote

Umito November 1, 2024

Nonfarm payrolls expected to increase by 113,000 in October
Hurricanes and strikes could eliminate at least 100,000 jobs
The unemployment rate is estimated unchanged at 4.1%
The average hourly wage is expected to increase by 0.3%; up 4.0% year/year
The average work week is expected to remain stable at 34.2 hours

WASHINGTON, Nov 1 (Reuters) – U.S. job growth likely slowed sharply in October due to disruptions from hurricanes and strikes by aerospace factory workers, but a steady unemployment rate should provide some relief assurance that the job market remains on solid footing before Tuesday. election.

The Labor Department’s closely watched jobs report, scheduled for release Friday, will be the last major economic data before Americans head to the polls to choose Democrats. Vice President Kamala Harris or Republican former president Donald Trump as the country’s next president.

Polls show the race is a draw. Americans have yet to warm to the strong performance of the economy, which has eclipsed its global peers, plagued by high food and rent prices. The low number of layoffs is a mark of the strength of the labor market.

“The job market is still relatively strong,” said Cory Stahle, an economist at Indeed Hiring Lab. “There are still plenty of opportunities, but obviously things have calmed down and people’s experience of the job market will depend somewhat on the type of job they are looking for.”

Nonfarm job creation likely rose by 113,000 last month, following a rise of 254,000 in September, according to a Reuters survey of economists. Estimates ranged from no jobs created to 200,000 positions created. The payroll figure forecast for October would be the lowest in six months.

Hurricane Helene devastated the Southeast in late September, and Hurricane Milton hit Florida a week later.

Economists are divided on the extent of the wage decline caused by Helen and Milton, with estimates ranging from 25,000 to 70,000 jobs.

“Typically, salaried workers are paid when a business is closed due to a natural disaster, while hourly workers are not,” said Stephen Stanley, chief U.S. economist at Santander Capital Markets. “Thus, the largest impacts could be seen in industries with a high percentage of hourly employees, such as restaurants and retail. Still, unless the fallout is massive, it could be difficult to detect .”

The Labor Department reported last week that there were 41,400 new workers on strike, including 33,000 machinists at Boeing. (TO FORBID)open a new tab and 5,000 at Textron, an aerospace company, when employers were surveyed for the October jobs report. The other 3,400 worked at three hotel chains in California and Hawaii.

Workers who do not receive wages during the survey period, which includes the 12th day of the month, are counted as unemployed in the establishment survey from which the payroll figure is calculated. Boeing implemented phased furloughs to conserve cash during the strike, but economists were optimistic that those workers would have received a paycheck during the week of investigation.

The impact on Boeing’s supplier payrolls is uncertain, although layoffs have been reported.

Estimates of the expected workforce affected by the storms and strikes ranged from 70,000 to around 100,000 people, concentrated in the construction, manufacturing, retail, and leisure and hospitality sectors. . Layoffs at Chrysler parent Stellantis (STLAM.MI)open a new tab probably also weighed on employment in the manufacturing sector.

NO RETURN OF THE LABOR MARKET

“We think the true underlying pace of job growth was probably around 170,000 in October,” said Lydia Boussour, senior economist at EY-Parthenon. “A slowdown in the labor market is not on the horizon in the near term, judging by the number of layoffs which remains historically low and by companies’ more strategic management of the workforce through retrenchment salaries and strategic resizing efforts.”

Indeed, initial claims for unemployment benefits fell to a five-month low, reversing the surge seen following the hurricanes, signaling that a rebound in payrolls was likely in November.

The unemployment rate was not affected by the distortions, as strikers would be counted as employed in the household survey from which the rate is derived. Workers unable to work due to inclement weather would be reported as employed, “employed, but not at work” under the BLS classification.

The unemployment rate is expected to remain unchanged at 4.1% in October. However, it is possible that temporary layoffs linked to the labor dispute at Boeing could increase the unemployment rate.

Economists, however, say a marginal rise in the unemployment rate would not be alarming and expect the Federal Reserve to sort through the noise and cut interest rates by 25 basis points next Thursday. A rise in the unemployment rate to 4.3% in July from 3.8% in March was one of the catalysts for the U.S. central bank’s unusually large half-percentage-point cut in interest rates in September, the first reduction in borrowing costs since 2020.

The Fed’s policy rate is now in a range of 4.75% to 5.00%, after being raised by 525 basis points in 2022 and 2023.

Even as employers have reduced hiring, they are retaining workers, supporting wage increases and consumer spending. The average hourly wage is expected to increase by 0.3% after gaining 0.4% in September. This would keep annual wage growth at 4.0% in October.

“If we look at long-term trends, the labor market could still be considered healthy,” said Rachel Sederberg, senior economist at Lightcast. “It’s important to remember that we are still in a good place, if we look at ourselves by historical standards.”

Reporting by Lucia Mutikani; Editing by Andrea Ricci

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