Final jobs report before Election Day shows US economy added 12,000 positions amid strikes and storms
Nov 1, 2024, 10:13 AM | Updated: 10:59 am
(Yuki Iwamura/Bloomberg/Getty Images via CNN Newsource)
(CNN) — The monthly jobs report — the final piece of major economic data to land before a consequential, contentious and too-close-to-call election — was clear as mud.
The US economy added just 12,000* jobs in October, according to data released Friday by the Bureau of Labor Statistics. If the initial estimate were to hold firm, it would be the weakest monthly job gain since 243,000 jobs were lost in December 2020 when Covid and its variants reared their ugly head.
Friday’s tally is far below September’s revised total of 223,000 jobs added and expectations for a 112,500-job gain.
*And now to the asterisk: Friday’s net gain was a reflection of temporary shocks to the US labor market, with this snapshot bearing the impacts and ripple effects of two major deadly hurricanes and large labor strikes.
“Between storms, labor strikes and data collection issues, the labor market numbers we’re seeing today should be taken with a grain of salt,” Elizabeth Renter, senior economist at NerdWallet, wrote in commentary issued Friday. “Even though they came in lower than anticipated with that in mind, the news doesn’t warrant panic about overall economic health.”
Economists had warned that those events would heavily distort the data, making it much harder to interpret the true underlying health of the labor market.
On Friday, BLS said as much, noting a shorter data-gathering period was exacerbated by collection efforts in weather-affected regions.
However, amid the murkiness in the payroll data, the unemployment rate (which is generated by a different survey that doesn’t count weather-affected workers as unemployed) provided a signal of stability in the labor market: It held steady at 4.1%.
“I think we’d start to get more concerned if we saw people losing their jobs,” Cory Stahle, an economist at the Indeed Hiring Lab, told CNN in an interview Friday.
Expectations for an eventual upward revision
The dual hurricanes of Helene and Milton, which made landfall on September 26 and October 9, respectively, impacted the ability for the BLS to collect data from businesses in the affected regions, officials for the labor data agency wrote in a note accompanying the jobs report.
In the establishment survey — one of two surveys that feed into the monthly employment report — the reference period is the pay period that includes the 12th of the month. If an employee did not work and did not receive any pay during that period, they would not be counted as employed.
Those data-collection challenges were exacerbated by a shorter collection period: Typically, the BLS gathers data over a range of up to 16 days; but in October, it was 10 days, according to the report.
“It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is 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,” BLS officials wrote in the report.
The response rate of 47.4% was the lowest since 1991, BLS data shows. That rate has averaged 65% in the past four years.
Additionally, the BLS did not make any adjustments to its estimation procedures for either the establishment or household survey; so, by letting the numbers speak for themselves, that sets the stage for this meek 12,000-job figure to grow in the coming months, Stahle said.
“I think the expectation here would be for it to be revised upward,” he said.
Data is volatile, it is fluid, and it’s often revised as more comprehensive information becomes available.
When it comes to the jobs report, monthly estimates are considered preliminary when first published, because not all respondents report their payroll data in time (and that’s especially true this time; because in moments of crisis, submitting data to the BLS is not a priority for those dealing with the devastation of the storm).
Those survey-based estimates are revised twice further and then held constant until the BLS applies its robust “benchmarking” process to square the estimates with quarterly tax filings.
Not ‘falling off a cliff’
The BLS also noted that there was no discernible effect in its household survey, which generates the unemployment rate. That survey counts people who miss that week of work for weather-related events as employed (regardless of pay).
As such, even though the household survey is typically considered the more volatile of the two, how much or how little the unemployment rate shifted was expected to provide a truer indicator of the health and trajectory of the underlying labor market, economists told CNN this week.
The unemployment rate held firm at 4.1%. Unrounded, it did nudge higher, to 4.14% from 4.05% in September, Matthew Bush, US economist at Guggenheim Investments, told CNN.
“The labor market is not falling off a cliff like the payroll numbers would imply,” he said.
While the expectation is for this number to grow — as did the Hurricane Harvey- and Irma-impacted September 2017 data that started out as a 33,000-job loss and was revised up to a 18,000-job gain in the following month — the recent trend of revisions has been to the downside. A once-in-a-century pandemic and challenges around estimating last year’s immigration surge have jolted tried-and-true methodology, economists have said.
On Friday, September’s surprisingly strong gains of 254,000 jobs were revised lower to 223,000; and August’s weaker-than-expected job growth plunged by 81,000 to land at a mild 78,000-job gain.
Despite the muddied October data, the US labor market activity remains historic: This period of employment expansion is tied for the third-longest in history, BLS data shows.
Still, a clean October report could have gone a long way in providing some clarity about whether the labor market was weakening or picking back up, Claudia Sahm, chief economist at New Century Advisors, told CNN this week.
That, of course, was not in the cards; but despite the noise, there are some indications of how the labor market is faring and what that means for the economy and monetary policy moving forward, economists said Friday.
“We have a resilient labor market that’s clearly decelerating and softening,” Lydia Boussour, senior economist at EY-Parthenon, said in an interview.
What the numbers show
Where the jobs were lost/gained: Health care and government, two of the three major drivers of job growth in recent years, continued to add employment, showing increases of 51,300 jobs and 40,000 jobs, respectively.
The third leg of that stool, leisure and hospitality, however, lost 4,000 jobs. Given Florida’s tourism-centric economy, this was one industry expected to show the impacts from the hurricanes.
The construction industry also appears to have been weakened by storm activity as well, noted Dean Baker, senior economist for the Center for Economic and Policy Research. That sector recorded a net gain of 8,000 jobs when it’s averaged 20,000 this year through September, he said.
The largest job losses occurred in temporary help services (-48,500); professional and business services (-47,000); and manufacturing (-46,000). BLS noted that the manufacturing jobs declined due to strike activity.
Of the 41,400 new workers that went on strike this week, 33,000 were Boeing machinists and another 5,000 were Textron Aviation machinists, according to BLS strike data. Textron ended its strike two weeks ago.
Labor force participation: The percentage of the working-age population that is employed or seeking a job ticked down to 62.6% from 62.7% in October. That rate has bounced between 62.5% and 62.7% all year.
The employment to population ratio edged down as well, to 60% from 60.2%, BLS data shows.
Wage growth: Average hourly earnings grew 0.4% for the month and held steady at 4%. Pay gains have slowed considerably since March 2022, a reflection of a rebalancing of supply and demand in the labor market following the pandemic as well as the impacts from the Federal Reserve’s brash increase in interest rates to rein in high inflation.
Earlier this week, the BLS’ latest quarterly employment cost index (a more comprehensive gauge of worker pay trends) showed that compensation cooled to 3.9% annually.
What this means for the Fed
“In our view, we’re still on track for a more cautious [quarter-point] rate cut at next week’s policy meeting,” Boussour said. “We think that Fed officials will be inclined to look through some of that noise in the October jobs report, and they will rely on all the labor market data that we’ve been getting, which is pointing to an environment where we have cooler labor market dynamics and ongoing wage growth disinflation.”
Through October, factoring in the 12,000*-job gain, the US has added 170,000 jobs per month. And with expectations that job growth and wages will continue to slow, that could lead to slightly slower economic growth by the middle of next year, Boussour said.
“We’re looking at all these indicators to get a sense of whether we see a more dramatic downshift in labor market conditions,” she said. “But our view is that essentially what you’re likely to see in the coming months is job growth settling somewhere below trend.”