Barely any jobs were created in the US in the month of October and that is saying a lot for an economy that has not stopped creating jobs in the last four years, when it emerged from the pandemic. The unemployment rate remains at 4.1%. Today’s data returns the labor market to pandemic levels, but it has been a strange month, marked by hurricanes, which have prevented the collection of reliable data, and the impact on 44,000 jobs of the Boeing strike.
Jobs grew by 12,000 payrolls during the month of October. These are such low numbers that they had not been seen since December 2020, when the country was emerging from the pandemic.. The market consensus was expecting a creation of 110,000 jobs. The previous month, employment was moving by 254,000 net additions.
The unemployment rate was unchanged at 4.1% in October, and the number of unemployed remained virtually unchanged at seven million people.
It must be taken into account that the figures are marked by the impact in some states of the southeastern United States due to the passage of the Hurricanes Helen and Milton and for the strike of Boeing employees. The Department of Labor indicates that the labor dispute caused a loss of 44,000 transportation-related jobs, but the effect of the hurricanes on employment “cannot be quantified.”
“The initial facility survey data collection rate for October was well below average. However, collection rates were similar in storm-affected and unaffected areas…It is likely that payroll employment estimates in some industries would be affected by the hurricanes; however, it is not possible to quantify the net effect,” the Bureau of Labor Statistics has warned.
The Fed derivative
The word that sums up the analysis of employment data is confusion. “It will be difficult for both investors and members of the Federal Reserve (Fed) to draw conclusions from the aforementioned employment report,” comments Juan José Fernández-Figares, Director of Management at Link Securities.
But the evolution of employment, or rather, its strength, has driven Powell and his boys crazy to define a roadmap with rates. Yesterday, the inflation data moved market expectations and put a stop to future cuts.
The financial swaps market continues to price in a 25 basis point cut at next week’s meeting (Wednesday, November 7) and three more cuts until the March 2025 meeting, following employment data. Currently, the Fed maintains the interest rate range between 4.75% and 5%. This roadmap assumes that the floor of the bearish cycle will be between 3.75% and 4%, after four consecutive declines.
“Strikes and hurricanes explain only some of the weaknesses in the labor market” says Samuel Tombs, chief US economist at Pantheon Macroeconomics. “Until we have state-level data in two weeks, it’s impossible to isolate the underlying trend, but payrolls, excluding temporary help and leisure and hospitality sectors , the two sectors that usually suffer the brunt of hurricanes, as well as the transportation equipment manufacturing sector affected by the strike, increased only 69,000, half of their average increase in the previous 12 months,” he anticipates.
We will have to wait for the revisions of the November data to remove the leaves. The change in total employment for August was revised down by 81,000 jobs, going from an increase of 159,000 to 78,000 jobs, and the change for September was revised down by 31,000, going from an increase of 254,000 to 223,000. With these revisions, employment in August and September combined is 112,000 lower than previously reported.
“The downward revisions are significant, and today’s figure is closer to the evidence from surveys by other organizations,” recalls James Knightley, chief economist at ING. The Statistics Office admitted to having overestimated employment by a third in the period from April 2023 to March 2024, and “there is concern that there continues to be a structural overestimation,” it underlines.
“With the inflationary backdrop less threatening and the Federal Reserve putting more emphasis on employment, today’s report cements expectations for a 25 basis point rate cut next week. We expect this to be followed by another rate cut. rates of 25 basis points in December,” says the expert.
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