Multiple hurricanes and large strikes likely marred October’s nonfarm payrolls report, which showed far fewer jobs created during the month than expected, but on-par unemployment and even growth in hourly wages.
The Labor Department reported Friday that nonfarm payrolls grew by a tepid 12,000 in October, easily falling under economists’ expectations for 113,000. Figures for the past couple of months were revised lower, too. September’s jobs total saw a reduction of 31,000, to 223,000 jobs created. August’s payrolls tally, meanwhile, was revised lower by 81,000, to 159,000.
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However, while the headline number represented a wide miss, the figure was actually better than some experts had anticipated in the wake of numerous October disruptions.
“Importantly, the pace of job creation was skewed by the devastating effects of Hurricane Milton and Helene, then distorted further by obstacles presented by major employee strikes where manufacturing took a hit,” says Eric Roberts, Executive Director and Chief Executive Officer USA at Fiera Capital. “Stronger-than-expected data from this month’s jobs report, even slightly at 12,000 jobs added, is a welcome sign for the Fed and for consumers that the American economy is stabilizing.”
October’s unemployment rate of 4.1% was both level with September and right where economists expected. Hourly earnings, meanwhile, actually bested estimates, up 0.4% month-over-month vs. calls for 0.3%. And the headline miss aside, this report marked the 46th consecutive month of payroll gains.
Here’s a brief look at the jobs report’s most pertinent details:
- October payrolls: +12,000 (vs. +113,000 est.)
- October unemployment: 4.1% (vs. 4.1% est.)
- October hourly earnings: +0.4% (vs. +0.3% est.)
- September payrolls (revised): +223,000 (vs. +254,000 previously)
- August payrolls (revised): +78,000 (vs. +159,000 previously)
Digging deeper into the October jobs report …
The biggest decline came from professional and business services, which saw 47,000 jobs disappear, but all of those losses (and then some) came from temporary help services roles, which were off 48,500 and has declined by 577,000 jobs since peaking in March 2022. Manufacturing also experienced a sizable decline, of 46,000 jobs, but the Bureau of Labor Statistics notes that 44,000 of those came from transportation equipment manufacturing “largely due to strike activity.”
The economy actually saw major gains in a number of categories. Health care and social assistance continued to grow at a brisk pace, up 51,300 jobs compared to an average monthly gain of 58,000 over the past year. Governmental roles expanded by 40,000, also similar to its 43,000 monthly pace.
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Many economists strongly expect October’s figures will be revised next month.
“Payrolls are likely to rebound in November, and we’ll ultimately have to take the average of October and November for more clarity,” says Sonu Varghese, Global Macro Strategist at Carson Group.
Despite this, and despite that the report follows a still-brisk GDP print from the third quarter, Friday’s data was largely viewed as enough to keep the Federal Reserve on track to cut its benchmark rate at the upcoming Federal Open Market Committee meeting, set for Nov. 6-7. As of Friday morning, the CME FedWatch Tool showed that trading in federal-funds futures was pricing in a 99.5% chance of a 25-basis-point cut to the federal funds rate.
“The big picture is that the labor market continues to cool down (even beyond hurricane effects), and this should keep the Fed on pace for rate cuts in November and December,” Varghese says.
Adds Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management: “While the Fed will likely attribute some of the weakness in today’s data to one-off factors, the softness in today’s data argues for the Fed to continue its easing cycle at next week’s meeting. Stormy numbers but sky clearing for November 25-basis-point cut.”
More Expert Reactions to October’s Jobs Report
Here’s what strategists, financial managers, and other experts had to say about the October employment situation:
Lara Castleton, US Head of Portfolio Construction and Strategy (PCS), Janus Henderson Investors
“This is an underwhelming and muddying jobs report five days before an election. Markets were looking for a clear signal and this report did not deliver. However, the report is not expected to impact the Fed’s rate cut decision later in the month, which will likely be 25 basis points. For investors who are looking for a soft landing playbook, focusing on price/earnings-to-growth ratio can help push past the noise.”
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Scott Helfstein, Head of Investment Strategy, Global X
“We should be careful to read too much into this jobs number with severe storms and geopolitical uncertainty. Last month was really strong. This month was weak. That is the reality of high-frequency data. This jobs number was disappointing. The weak nonfarm payroll growth follows hurricanes and election concerns. Investors should stay focused on the macro backdrop. Economic growth and corporate earnings continue to deliver. This is a mid-cycle expansion: corporate investment and a strong consumer. Financial markets dropped in July over a single bad jobs number. That was a head fake. Things are good, and that is what investors should focus on.”
Jason Pride, Chief of Investment Strategy & Research, Glenmede
“In contrast to the wonky payrolls figures, it appears that the household survey was less affected by the October disruptions. While the unemployment remained steady at 4.1%, the internals tilted weaker on the margin. The civilian labor force shrunk, and the number of unemployed persons rose, so the steady headline figure appears to be masking a bit of incremental weakness. While not enough to sound the alarm on the health of the labor market, it warrants close monitoring in the perhaps cleaner employment reports through year-end.
“There are not a lot of clean insights from the headline figures for the Fed to react to, but some of the underlying data appeared decent enough for the Fed to proceed with a 25-basis-point cut next week. Nothing in this report changes the fact that monetary policy remains notably tight. With inflation within a reasonable range of the Fed’s target, a regimented process to return fed funds to the neighborhood of neutral remains warranted. Absent any material disruptions, the base case going forward should be 50 basis points of cumulative rate cuts through year-end, and further cuts in 2025 that sees rates settle out in the 3.0-3.5% range by mid-year.”
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Steve Rick, Chief Economist at TruStage
“In September, we saw the Fed cut interest rates by 50 basis points, and in recent weeks there has been speculation whether they will cut rates again at the upcoming November meeting. The jobs report coming in above expectations is an important indicator that while inflation is in the process of being tamed, the jobs market remains hot. We remain expectant that we will see the Fed cut by at least 25 basis points next week.”
