Employers added just 12,000 jobs in October. This seems bad, but there’s a catch.

U.S. employers added just 12,000 jobs in October, but the labor market is likely not as weak as that figure suggests.

This is because the figure was skewed by the ongoing impact on Boeing and the impact of Hurricanes Milton and Helen. The unemployment rate, which is less susceptible to temporary distortions, remained steady at 4.1% in October, according to a Labor Department report released Friday.

Overall, the labor market is likely to be cooling but remains fairly resilient despite the weak October numbers. However, the report comes at a sensitive time, just days before a presidential election in which voters are focused on competitiveness.

The data also comes ahead of the Federal Reserve’s interest rate decision next week.

The labor market is experiencing a cooling

The Boeing machinists’ strike, now in its second month, has resulted in the layoffs of more than 40,000 workers, accounting for almost all of the decline in industrial employment last month. Striking workers are expected to vote on Monday on a preliminary contract that will end the strike.

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The effects of Hurricanes Helen and Milton are harder to quantify, but the hurricanes almost certainly hurt monthly job totals because they made landfall shortly before the government tally was taken.

While economists had expected some distortion in October employment numbers, the decline was much sharper than expected. Job gains for August and September were also revised down by a total of 112,000.

Other indicators point to a more gradual cooling in the labor market. The number of vacancies has been steadily declining in recent months. And employers no longer have to compete so hard to find workers. Employers’ labor costs rose 3.9% in September from a year earlier, a smaller annual increase than the previous year.

But overall the economy remains stable

However, the labor market remains fairly resilient with low unemployment and the latest data shows the overall economy is growing at a healthy pace, despite widespread disappointment with high prices.

Wages have risen faster than prices for more than a year, giving workers a real boost in purchasing power.

“You’re still seeing wages outpacing inflation,” says economist Sarah House of Wells Fargo. “So that’s still very helpful for overall consumer spending growth and keeping it in the black.”

Consumer spending rose 3.7% year-on-year in July, August and September, contributing to robust GDP growth during the quarter.

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The Federal Reserve is monitoring both the labor market and inflation as it decides how quickly to cut interest rates at its Nov. 6-7 meeting. According to the Commerce Department’s inflation gauge, the Fed’s preferred gauge, prices rose 2.1% in October from a year earlier — only slightly above the central bank’s 2% target.

Most economists expect the central bank to cut its benchmark rate by a quarter of a percentage point when policymakers meet next week.. This followed a half-point rate cut at the Fed’s last meeting in September.

Copyright: NPR 2024