A now hiring sign outside a business in Somerville, Mass., on Sept. 1, 2022.Brian Snyder/Reuters
U.S. job growth almost stalled in October as strikes in the aerospace industry depressed manufacturing employment while hurricanes shortened the collection period for payrolls, making it hard to get a clear picture of the labour market ahead of next week’s presidential election.
The Labour Department’s closely watched employment report on Friday provided the last major economic data before Americans head to the polls to choose Democratic Vice-President Kamala Harris or Republican former president Donald Trump as the country’s next president. Polls show the race is a toss-up.
Nonetheless, the labour market is cooling, with employment gains for August and September revised down by 112,000 jobs. While the unemployment rate held steady at 4.1 per cent in October, that was because more people left the labour force. Economists expected Federal Reserve officials would brush aside the report and deliver another interest-rate cut when they meet next week.
“This is not the clarifying report on the economy that Americans and markets needed before next week’s election to answer whether voters are better off than they were four years ago,” said Christopher Rupkey, chief economist at FWDBONDS.
“The one thing we can rule out is that the dramatic slowdown in non-farm payroll jobs does not indicate the economy is at a tipping point and in danger of falling over the cliff and into recession.”
Non-farm payrolls increased by 12,000 jobs last month, the smallest gain since December, 2020, the Labour Department’s Bureau of Labour Statistics said. The economy added 112,000 fewer jobs in August and September than previously reported. Economists polled by Reuters had forecast payrolls would rise by 113,000.
Hurricane Helene devastated the U.S. Southeast in late September and Hurricane Milton lashed Florida a week later.
The response rate for the establishment survey in October, from which payrolls are calculated, dropped to 47.4 per cent. That was the lowest reading since January, 1991, and was considerably below the 69.2-per-cent average for October in the past five years.
The household survey from which the unemployment rate is derived found that 512,000 people reported they could not work in October, a record high for the month. About 1.4 million people who normally hold full-time positions said they could only work part-time because of the weather. That was also an all-time high for October and compared with only 129,000 last year.
The Bureau of Labour Statistics acknowledged that payroll employment estimates in some industries were likely affected by the hurricanes, but said it was “not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events.”
It said the collection period for the responses, which can range from 10 to 16 days, only lasted 10 days in October and was completed several days before the end of the month.
There was a concentration of job losses in industries that tend to employ hourly workers, a group that tends to be most affected by business closings because of weather disruptions.
The strikes by machinists at Boeing Co. and Textron Inc., an aircraft company, subtracted 44,000 jobs from transportation equipment manufacturing payrolls. Workers who do not receive a paycheque during the survey period are counted as unemployed in the establishments survey. Some economists estimated the storms, strikes and shorter collection period had subtracted roughly 115,000 jobs from payrolls.
“The hurricanes clearly had a far greater impact on employment last month than most economists had anticipated,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “Much of that should reverse in November.”
First-time applications for unemployment benefits dropped to a five-month low in late October after surging in the aftermath of the hurricanes.
Nearly all the jobs added last month were in the health care and government sectors. Health care employment increased by 52,000 jobs, spread across ambulatory and nursing-care facilities. Government payrolls increased by 40,000, boosted by state and local government hiring.
Manufacturing employment declined by 46,000 positions, also reflecting a loss of 6,000 jobs in the automobile industry, a drop that was probably linked to layoffs at Chrysler parent Stellantis. Separately, Boeing has raised its wage offer to its striking workers, who will vote next week on the new package.
Professional and business services payrolls dropped by 47,000 jobs, with temporary help services employment declining by 49,000 positions. Leisure and hospitality payrolls fell by 4,000, while retail employment dropped by 6,400 positions.
The share of industries reporting an increase in payrolls fell to 55.6 per cent from 59.8 per cent in September.
Average hourly earnings rose 0.4 per cent last month after gaining 0.3 per cent in September. They were likely lifted by hourly paid workers dropping out of the payrolls calculation.
Wages increased 4.0 per cent in the 12 months through October after advancing 3.9 per cent in September. Strong wage growth is underpinning consumer spending and the overall economy.
Stocks on Wall Street traded higher. The dollar gained versus a basket of currencies. U.S. Treasury yields rose.
Financial markets have fully priced in a 25-basis-point rate cut by the Fed next Thursday. A rise in the unemployment rate to 4.3 per cent in July from 3.8 per cent in March was one of the catalysts for the U.S. central bank’s unusually large half-percentage-point rate cut in September, the first reduction in borrowing costs since 2020.
The Fed’s policy rate is now set in the 4.75-per-cent to 5.00-per-cent range, having been hiked by 525 basis points in 2022 and 2023.
The household survey, whose response rates the Bureau of Labour Statistics said were within normal ranges, showed 220,000 people left the labour force in October, offsetting a drop of 368,000 in employment.
Permanent layoffs rose by the most since November, 2021, but fewer people experienced longer bouts of unemployment or worked part-time for economic reasons.
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, was unchanged at 7.7 per cent. The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, dropped to 60.0 per cent from 60.2 per cent in September.
“The labour market continues to gradually cool, providing the Fed with justification to cut rates again at next week’s meeting and in December,” said Sam Williamson, senior economist at First American.