The US economy added just 12,000 new positions in October, in by far the weakest jobs report of the Biden administration, as the closely watched number was hit hard by hurricanes and the Boeing strike.
Friday’s figure, published by the Bureau of Labor Statistics just four days before the US election, was seized upon by the Trump campaign. However, the Biden administration argued that the underlying data — notably on unemployment — remained strong.
“This jobs report is a catastrophe and definitively reveals how badly [vice-president and Democratic nominee] Kamala Harris broke our economy,” the Trump campaign said.
President Joe Biden said that as hurricane recovery and rebuilding efforts continued, “job growth is expected to rebound in November”.
October’s labour market figure was far below the average forecast of 100,000 job gains in a poll of economists by Bloomberg and well short of September’s downwardly revised figure of 223,000 new jobs.
But in a sign of the underlying health of the US labour market, the unemployment rate remained at 4.1 per cent.
“We’re still seeing a labour market that’s struggling to find its footing,” said Sarah House, senior economist at Wells Fargo, who referred not just to the impact of the hurricanes and the strike but also to the “pretty weak” revised figures for the previous two months.
“The jobs market is still strong but it’s not overheated any more either,” she added.
The latest data cemented market expectations of a quarter-point Federal Reserve rate cut next week. Before the figures were published, futures traders had priced in a small chance rates would be held at the central bank’s meeting on Thursday.
Ajay Rajadhyaksha, global chair of research at Barclays, added that, following publication of the October jobs figures, markets now saw a 0.25 percentage cut in December as “definitely on the cards”.
US government bond yields initially dropped from three-month highs immediately after the report, reflecting falling interest rate expectations, but completely retraced that move as the session wore on.
The policy-sensitive two-year Treasury yield, which moves inversely to prices, fell after the payroll figure was published before rebounding to trade at 4.21 per cent, up about 0.04 percentage points on the day.
US stocks gained on Friday, with the S&P 500 closing 0.4 per cent higher and the technology-heavy Nasdaq Composite up 0.8 per cent.
“We expected the jobs report to certainly be softer in relation to prior months, just due to distortions created by hurricanes and strikes,” said Mark Cabana, head of US rates strategy at Bank of America.
But he added: “That said, it was softer than our economists’ expectations — and it does appear as though it is consistent with a softening overall labour market.”
The October jobs data was gathered during the week that Hurricane Milton made landfall in Florida and shortly after Hurricane Helene slammed the south-east of the US.
The continuing strike at Boeing, in which 33,000 employees have stopped working, also dragged the figure down.
The BLS said the hurricanes had affected jobs growth but said it was “not possible to quantify the net effect” on the monthly change in employment, hours worked or wage gains. It added that survey responses were “well below average” for the jobs report.
Many economists expected a drag of around 40,000 positions from the storms alone.
Manufacturing employment fell by 46,000 in October, the vast majority of which was tied to the transportation equipment sector, which was directly affected by the strikes.
The construction industry, retail, leisure and hospitality and financial sectors all also recorded little or no jobs growth.
Overall, payrolls growth in the private sector fell by 28,000 positions.
In a further sign that the labour market is cooling, August payrolls growth was revised down by 81,000 to 78,000 net jobs. Combined with the downward revision for September, that means that, for the two-month period, the US economy generated 112,000 fewer jobs than previously reported.
As inflation has slowed in recent months, the Fed has become increasingly focused on protecting the labour market.
In an effort to achieve a “soft landing”, in which inflation returns to the Fed’s 2 per cent target without triggering a recession, officials are trying to lower rates to a “neutral” level that does not hamper growth.
David Kelly, chief global strategist at JPMorgan Asset Management, said such an outcome was still likely despite Friday’s figures.
“I wouldn’t overestimate the significance of this report . . . There were particular difficulties in calculating the numbers this time around,” he said.
“There’s a little bit of a pothole on this part of the runway, but it’s basically a soft landing.”
Policymakers and economists have signalled they expect the downward distortion of October’s payrolls figure to fade away with the impact of the strike and the hurricanes over time.
Robert Tipp, head of global bonds and chief investment strategist at PGIM Fixed Income, said Friday’s payrolls number “has firmly put the market back on the Fed’s existing narrative of cautious rate cuts in order to reduce the degree of restraint and to ensure a soft landing.”
“[A] soft landing remains the base case, although the market is likely to continue to traumatise itself every month as we get stronger and weaker data,” Tipp said.
