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October jobs report: Economy added 12K jobs amid storms, strikes; unemployment at 4.1%

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October jobs report: Economy added 12K jobs amid storms, strikes; unemployment at 4.1%

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Employers added just 12,000 jobs in October as hiring slowed substantially. The total was expected to be constrained by two Southeast hurricanes and several worker strikes but the tally was far lower than expected and job gains for previous months were revised sharply downward, raising concerns about a weakening labor market.

The report provides a final portrait of the economy just days before next week’s historic election and key Federal Reserve meeting. But the temporary hurdles will likely make it challenging for Fed officials to get a reading of the labor market’s underlying health, economists said.

The unemployment rate held steady at 4.1%, the Labor Department said Friday.

Before the report was released, economists surveyed by Bloomberg estimated that 105,000 job gains were added in October.

Also worrisome: Payroll gains for August and September were revised down by a whopping 112,000. August’s additions were downgraded from 159,000 to 78,000 and September’s, from 254,000 to 223,000.

How did hurricanes affect the economy?

Hurricanes Helene and Milton likely reduced employment last month by about 70,000 in the Southeast, Oxford Economics estimated. Goldman Sachs expected a smaller impact of 40,000 to 50,000 jobs. Hurricane Helene hit Florida’s Gulf Coast on September 26, well before the Labor Department conducted its jobs survey, the agency noted, but Milton struck during the week of the survey.

Across the region, the number of businesses open, employees working and hours logged all fell by about 9%, according to Homebase, which makes employee scheduling software.

Meanwhile, an ongoing Boeing strike – along with smaller walkouts at Textron, an aerospace parts maker, and Hilton Hotels – likely suppressed payrolls by about 40,000, according to research firm Nomura.

All told, the storms and strikes probably shaved job gains by about 100,000, forecasters estimated.

How much will the Fed cut interest rates?

Yet, because those tallies are uncertain, Barclays said the Fed probably would not read too much into an unusually low October jobs figure. A surprisingly strong number, however, could prompt the central bank to put off a planned interest rate cut for December, the research firm said.

In September, the Fed lowered its key rate by a hefty half percentage point – its first decrease since 2020 – because inflation has been easing and job growth slowed sharply in August. The Fed reduces rates to juice borrowing activity and a flagging economy or return rates to normal as inflation abates. Fed officials hiked rates aggressively in 2022 and 2023 as inflation hit a 40-year high of 9.1%.

In September, however, employers added well over 200,000 jobs and tallies for previous months were revised higher. And data this week revealed the economy grew at a healthy 2.8% annual rate in the third quarter as consumers kept spending. A persistently strong economy and job market could lead the Fed to pause its rate cuts to avoid reigniting inflation.

Assuming the labor market continues to cool gradually, many forecasters believe the Fed will move ahead with tentative plans to lower rates by a more modest quarter point in November, December and at every other meeting next year.

How is the US job market right now?

More broadly, job growth has been solid despite high interest rates and inflation as strong wage gains bolster consumption. A surge of immigrants have filled job openings and further stoked spending.

But the flow of immigrants underpinning labor force growth is slowing, Goldman Sachs said. At the same time, the government and health care sectors, which have propped up U.S. job growth for months, have finally beefed up payrolls near where they would have been absent the pandemic, Goldman said. As a result, they’re now adding jobs more slowly.

The upshot is expected to be a notable pullback in job creation into next year to a pace that should help keep inflation contained while avoiding recession.

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