What Does October's Weak Job Growth Mean for the U.S. Economy?

The U.S. jobs report for October 2024 has revealed a disappointing addition of just 12,000 jobs, significantly below economists' expectations of 100,000 and down from a revised total of 254,000 jobs added in September [9a0ae594]. This marks the weakest job growth since December 2020, with August and September job gains revised downward by a total of 112,000 [9a0ae594]. The unemployment rate has risen slightly to 4.14%, up from 4.1% in September, indicating a concerning trend in the labor market [dc658ed8][9a0ae594]. Notably, 29 states reported negative payroll growth, with Florida experiencing a loss of 38,000 jobs, the largest decline since 2017 [a23c0661]. The weak job numbers were notably influenced by Hurricane Milton's landfall on October 9, which likely caused around 51,000 job losses [a23c0661][9a0ae594]. The dockworkers' strike also resulted in a loss of 46,000 jobs in manufacturing, primarily due to the ongoing strike involving 33,000 Boeing employees [9a0ae594][3f24afbb]. Additionally, temporary help services saw a decline of 49,000 jobs, while sectors such as health care and government added 52,000 and 40,000 jobs respectively [9a0ae594]. Construction employment increased by 8,000 jobs, reflecting some positive movement in the labor market [9a0ae594].

However, the Bureau of Labor Statistics (BLS) report has been criticized for potentially misrepresenting job growth. The Establishment Survey (ES) indicated a decrease of 28,000 private sector jobs, while the Household Survey (HHS) showed a loss of 368,000 jobs from September to October [fe06228d]. The labor force shrank by 220,000, with 440,000 people dropping out entirely, raising concerns about the accuracy of the reported job gains [fe06228d]. The ES has over-reported job gains 13 times in the past 21 months, leading to skepticism about the reliability of these figures [fe06228d].

October's report also noted a spike in initial jobless claims, with an increase of 35,000 in early October, contributing to the overall negative outlook for employment [9a767b3b]. Despite these setbacks, the total number of employed workers fell by 368,000, and full-time employment has been negative for nine consecutive months, reflecting a troubling trend in job stability [9f3ba011]. Average hourly earnings saw an increase of 0.4% month-over-month and 4% year-over-year, yet many households continue to struggle with the rising cost of living [9a0ae594]. Consumer spending rose at an annual pace of 3.7% in the third quarter, indicating resilience despite the economic challenges, while GDP expanded at an annualized pace of 2.8% in the same period [25066dc0]. Inflation remains a pressing concern, with consumer prices having risen 20% since late 2020, although it has recently decreased to 2.1%, slightly above the Federal Reserve's target [3b0c6754]. Analysts are predicting a 25 basis point interest rate cut by the Federal Reserve in November and December 2024, as policymakers seek to navigate the current economic turbulence [25066dc0][9a0ae594].

The AIER Business Conditions Leading Indicator remained stable at 71 in September 2024, while the Roughly Coincident Indicator fell sharply to 58 from 92, indicating a potential slowdown in economic activity [dc658ed8]. The Lagging Indicator slightly increased from 25 to 33, suggesting mixed signals in the economy [dc658ed8]. Additionally, U.S. Heavy Truck Sales fell by 5.0%, and industrial production decreased by 0.3% in October, with manufacturing output dropping by 0.5% [dc658ed8]. The capacity utilization at factories fell to 76.2%, further reflecting challenges in the manufacturing sector [dc658ed8].

Lawrence Yun, chief economist of the National Association of Realtors, stated that the October jobs report indicates an economic slowdown and predicts at least one more Federal Reserve rate cut in 2024, with the FOMC meeting scheduled for November 2024 to discuss the federal funds rate [9a0ae594]. Andrew Crapuchettes, CEO of RedBalloon, described the October jobs report as 'shockingly low' and attributed the downturn to the impacts of hurricanes and labor strikes [3b0c6754]. He noted a 'wait-and-see' approach among employers due to the upcoming elections, emphasizing that previous months' job numbers have been significantly revised down, which could lead to further negative adjustments [3b0c6754]. His survey indicated that 87% of respondents would close their businesses if the Harris-Walz ticket wins, while 83% would expand hiring if Trump is re-elected [3b0c6754].

The Trump campaign has labeled the jobs numbers a 'catastrophe,' reflecting the heightened scrutiny of economic performance as the elections approach [3b0c6754]. Jared Bernstein from the White House characterized the slowdown as an anomaly, suggesting that optimism still exists among businesses despite the uncertainty [3b0c6754]. Bernstein estimated that job growth could be cut by up to 100,000 due to the impacts of hurricanes and strikes [7f382cab]. Investors and policymakers are closely monitoring these labor market trends, which are likely to influence future economic decisions and strategies. Furthermore, businesses announced 55,597 job cuts in October, a staggering increase of 51% from the previous year, indicating a troubling trend in employment stability [3b0c6754].

The report also indicates a significant drop in worker confidence, with September seeing 3.1 million job quits, the lowest in over four years, reflecting instability in the labor market [3b0c6754]. Sarah House of Wells Fargo stated that while the jobs market is not collapsing, the conditions are unstable, mirroring broader economic uncertainties [3b0c6754]. The PMI manufacturing index fell to 46.5%, indicating contraction in the manufacturing sector [9f3ba011]. Overall, since January 2021, the U.S. economy has added about 16.5 million jobs, with job growth averaging over 1.4 million per month during the first two years of the Biden administration [cc4d40b4]. However, the economy has experienced a tale of two eras, with inflation surging in 2021 and the Federal Reserve raising interest rates to combat it, leading to wage growth outpacing inflation since 2022 [cc4d40b4]. The current economic climate suggests a steady recovery, with expectations for slow and stable growth moving forward [cc4d40b4]. Biden has expressed optimism for a rebound in job growth in November, despite the current challenges [7f382cab]. The jobs report comes amid a backdrop of fluctuating oil prices, with Brent crude hovering around $70 a barrel, and major oil companies like ExxonMobil, BP, and Chevron reporting poor quarterly results due to low oil prices [9a767b3b]. OPEC+ has extended production cuts by a month, while Saudi Arabia remains hesitant to increase production in light of weak demand from China, which could further impact the U.S. economy depending on the outcome of the upcoming elections and the administration's policies regarding the Middle East conflict [9a767b3b].