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US jobs growth slows sharply as election looms

3 min read

Job growth in the United States experienced a significant slowdown in October, with employers adding just 12,000 positions compared to a much healthier increase of 223,000 in September. This sharp decline can be attributed to various factors, including hurricanes and ongoing strikes that disrupted economic activity, according to the Labor Department.

Despite the slowdown in hiring, the unemployment rate remained stable at 4.1%, indicating that while job creation has faltered, the overall labor market is still relatively resilient. These figures are particularly important as they are the last released before the upcoming presidential election, where voters will decide on the country’s next leader.

The Labor Department noted that while the healthcare and government sectors continued to see job growth, the manufacturing industry faced challenges due to strike actions. Notably, around 30,000 workers at aerospace giant Boeing have been on strike since September 13, which has severely hampered aircraft production. Strikes at Textron, another aircraft manufacturer, have further compounded these issues.

The manufacturing sector lost 46,000 jobs in October, with a significant portion—about 44,000—coming from transportation equipment manufacturing, primarily due to the ongoing strikes. Other major industries showed little to no change in employment figures over the month, suggesting a broader stagnation across various sectors.

Economists had anticipated a better performance, with a Reuters poll predicting a payroll increase of 113,000. The actual addition of 12,000 jobs fell far short of expectations, raising concerns about the economic outlook.

Brian Coulton, chief economist at Fitch Ratings, commented on the situation, saying, “At face value, the 12,000 increase is obviously a weak number, but it follows a very robust increase in September and was affected by strikes and possibly by the hurricanes.” He also noted that workers on strike were not included in last month’s jobs data, which likely contributed to the lower overall non-farm payroll numbers.

The impacts of Hurricane Helene, which wreaked havoc in the southeastern US in late September, were still being felt, along with Hurricane Milton, which hit Florida a week later. The Labor Department reported that approximately 512,000 individuals were unable to work due to extreme weather conditions, further clouding the employment landscape.

Despite the unexpected slowdown in job growth, there are expectations that the Federal Reserve will proceed with a 0.25 percentage point interest rate cut next week. Market analysts believe that the job report will not significantly alter the Fed’s policy direction, as many see the figures as temporary disruptions caused by the hurricanes and strikes.

Seema Shah, chief global strategist at Principal Asset Management, stated, “Markets can likely park the October jobs report to the side. Quite clearly, the hurricane has taken a heavy toll on the numbers, clouding the picture of labor market strength, and so should not impact the Fed’s policy rate path.”

Lindsay Rosner from Goldman Sachs Asset Management echoed this sentiment, suggesting that while the numbers are disappointing, the outlook for November is more promising, with expectations for a base point cut.

The Labor Department indicated that the lower-than-expected job growth figures were likely influenced by the hurricanes, highlighting that their survey methodologies do not effectively isolate the effects of extreme weather events. As a result, the full impact of these disruptions is difficult to quantify.

Over the past year, job growth in the US has indeed slowed, and the unemployment rate has begun to inch upward, although it remains historically low. Average hourly earnings have increased by 4% over the last year, reflecting some upward pressure on wages amid tight labor market conditions.

Last month, the Federal Reserve made a notable move by cutting interest rates by a larger-than-usual margin of 0.5 percentage points, citing a desire to prevent any further weakening of the labor market. As the economic landscape continues to evolve, both policymakers and job seekers will be watching closely to gauge the health of the labor market and the broader economy in the months ahead.

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