October Payrolls Report Nears Negative Territory, Reveals Job Market Strain
We anticipated that the October jobs report could very well mark the first negative print since 2020. Moments ago, the Bureau of Labor Statistics (BLS) released the much-awaited data, and we came close to that prediction: the October payrolls figure posted a surprisingly low increase of just 12,000 jobs. This was a steep decline from the initial 254,000 jobs reported in September, a figure that has since been revised down to 223,000. With only a 13,000 margin away from negative territory, this print illustrates a significant weakening in the job market.
This October result came in shockingly low, beating only the two most pessimistic estimates: Bloomberg Economics had predicted a drop of 10,000, while ABN Amro had forecast a flat figure. In fact, the print was a substantial miss by almost three standard deviations from what economists had projected.
Revisions for previous months, a trend that has continued throughout the current administration, once again showed substantial downward adjustments. August was revised down by 81,000, dropping from 159,000 to 78,000, while September saw a 31,000 downward adjustment from 254,000 to 223,000. Together, these revisions indicate that employment in August and September was actually 112,000 lower than initially reported. This follows the major September revision, which saw 818,000 jobs removed. In total, seven of the last nine months have now seen their figures revised downward.
With these constant downward adjustments, it's likely that by the time November's jobs report is released, October's figure will also be revised into the negatives. What's more, while the overall payroll number barely clung to positive territory, excluding 40,000 government jobs reveals that private payrolls actually declined by 28,000, making this the first negative private sector print since December 2020.
A portion of this decline, as we previously noted, can be attributed to specific, one-time events such as the Boeing strike and Hurricanes Helene and Milton. According to the BLS, "In October, the household survey was conducted largely according to standard procedures, and response rates were within normal ranges." However, the BLS did note that collection rates in the establishment survey were below average, particularly due to storm-affected areas, and that October's collection period was shorter, lasting only ten days as opposed to the usual 10–16 days.
The BLS acknowledged that hurricanes likely affected payroll estimates in some industries, although they couldn't quantify the net impact on employment, hours, or earnings because the survey isn't designed to isolate the effects of extreme weather events. Interestingly, while the BLS claimed it couldn't precisely determine the net effect of the hurricanes, they did report that the number of people not at work due to weather conditions surged to the third-highest level in recent history, rising by 512,000.
These factors give the BLS an excuse to cite weather-related disruptions as a reason for the plunge, although it's unable to quantify this impact. Realistically, if there's a change in administration, we might see different interpretations of this labor market trend. Should a new administration come in, the acknowledgment of economic downturns might be more transparent, as opposed to an optimistic spin.
In the meantime, the weaker-than-expected jobs print also gives the Federal Reserve justification to consider a rate cut. Today's data allows the Fed more leeway to pursue an interest rate cut next week, potentially by 25 basis points, regardless of how much of this downturn was attributed to hurricanes.
The rest of the jobs report didn't offer any notable surprises. The unemployment rate held steady at 4.1%, matching last month's figure and meeting expectations. The total number of unemployed remained largely unchanged at 7 million. Notably, however, the unemployment rate technically rose by about 0.1%, moving from 4.05% in September to 4.145% in October, likely due to increased layoffs (+166,000) and the return of re-entrants to the workforce (+108,000). Additionally, average unemployment duration crept up from 22.6 weeks to 22.9 weeks.
Wage growth managed to inch up slightly more than expected, with average hourly earnings rising by 0.4% in October, surpassing the 0.3% forecast and up from a revised 0.3% in September. Year-over-year, wages rose by 4.0%, aligning with expectations.
Some additional data from October's report reveals the following:
The number of permanent job losses increased slightly to 1.8 million. Temporary layoffs saw little change, remaining at around 846,000. Long-term unemployment, defined as joblessness lasting 27 weeks or more, held steady at 1.6 million and has risen by 300,000 from a year ago. This group accounts for nearly 23% of the unemployed. The labor force participation rate remained stagnant at 62.6%, and the employment-population ratio also held steady at 60.0%.
People working part-time for economic reasons showed little fluctuation, holding at around 4.6 million. Likewise, the number of individuals outside the labor force who still want a job was virtually unchanged at 5.7 million, while those marginally attached to the labor force held at 1.6 million. This group includes individuals who had looked for work at some point in the past year but not in the four weeks prior to the survey. Discouraged workers, a subset of the marginally attached who believe there are no jobs available, were unchanged at 379,000.
Sector-wise, healthcare saw a gain of 52,000 jobs, which aligns with the monthly average increase over the past year. Within healthcare, ambulatory services added 36,000 positions, and nursing and residential care facilities increased by 9,000. Government employment continued to trend upward, adding 40,000 jobs in October, primarily in state government, which contributed 18,000 jobs.
In contrast, temporary help services within the professional and business services category dropped sharply by 49,000, a significant decline. Since March 2022, this sector has lost 577,000 jobs. Manufacturing also faced setbacks, with employment falling by 46,000 in October, largely driven by a 44,000 decline in transportation equipment manufacturing due to strikes. Construction showed little change, adding just 8,000 jobs.
Analyzing this data, a few trends stand out:
First, the manufacturing sector continues to struggle, marking three consecutive months of job losses and four out of the last five months in decline. Second, the increase in construction jobs appears mismatched with recent declines in housing starts, completions, and job openings in that sector. Lastly, the difference between government and private jobs was striking, with more government jobs added in October than the total private sector jobs lost. This disparity highlights a key factor in avoiding an overall negative print, reflecting the influence of government employment in the current labor market landscape.