The October employment report revealed an increase of only 12,000 jobs, with a downward revision of 112,000 jobs over the past two months. This contrasts with the market expectation of 100,000, considering the impact of significant strikes and hurricane-related disruptions. The unemployment rate remained at 4.1%, with wages rising by 0.4% month-over-month.
The labor strike reduced the total job count by 44,000, but the impact of hurricanes remains unclear. The U.S. Bureau of Labor Statistics noted that survey response rates in October were significantly lower than average, yet similar across affected and unaffected regions. Some industries likely faced job estimate impacts due to the hurricanes, though quantifying the net effect is challenging. A rebound is anticipated in November.
In detail, the private sector saw a reduction of 28,000 jobs, with manufacturing losing 46,000 jobs, significantly influenced by the Boeing (BA, Financial) strike, which accounted for 33,000 lost jobs. Temporary jobs decreased by 49,000, while leisure and hospitality dropped by 40,000. Conversely, government hiring surged by 40,000, potentially due to new election staff, and private education and healthcare services added 57,000 jobs.
The possibility of a Federal Reserve interest rate cut has increased. The revised figures align more closely with evidence from surveys like ISM, NFIB, and Homebase. The Bureau of Labor Statistics has acknowledged an overestimation of employment figures by one-third from April 2023 to March 2024, with concerns about the structural overestimation persisting. There are also worries about the quality of newly added jobs, which appear to be more part-time and low-paying. Full-time employment continues to decline year-over-year, while part-time employment rises.
Given a less concerning inflation backdrop, the Fed has placed greater emphasis on employment. This report strengthens expectations for a 25 basis point rate cut by the Fed next week, with another cut likely in December.
