Call it job "destruction."
It's true that Hurricane Helene in late September and Hurricane Milton on October 9, both must have had an impact on employment data in Florida, North Carolina and several other southeastern states. Helene obviously struck ahead of the BLS reference period for October, while Milton hit during the October reference period. The BLS released a statement that the Household Survey was conducted according to procedure and that the response rate was within the normal range.
The Establishment response collection rate for October, however, was poor, but interestingly was similar when comparing areas impacted by the storms with areas not impacted. Therefore, no changes were made to either the Establishment or the Household survey estimation procedures. The statement goes on to explain that it was not possible to quantify or isolate the impacts of the storms on labor markets, but that there was no discernible effect on the national employment rate.
Job Destruction
Brace yourself. The numbers are awful.
From the Establishment Survey, the BLS reported Non-Farm Payrolls, once seasoned and adjusted for the birth/death model, increased by 12,000. Interestingly, that number was derived through government net hires adding up to a net +40,000, less a print of -28,000 for private sector net hires.
The BLS also reported downward revisions in total of 112,000 to the August and September data. This puts net "job creation" or calling it what it is according to the Establishment Survey of -100,000. More accurately, this would be referred to as "job destruction."
Flipping over to the Household Survey, the number of people that left the civilian labor force in October was 220,000, while the number of those outside of the labor force increased by 428,000.
The number of unemployed persons increased by 150,000, while the number of employed persons decreased by 368,000. So according to the Household Survey, October job creation/job destruction was -368,000.
The Participation Rate slowed from 62.7% to 62.6% as the Employment to Population Ratio dropped from 60.2% to an even 60%.
Unemployment Rates
Due to the numbers of folks leaving the labor force, the Unemployment Rate, despite the reduction in employed persons held tight at 4.1%. Due to a drop of 281,000 in the number of part-time workers, the Underemployment Rate also held steady at 7.7%.
Let's take a look at unemployment by race, gender and education. I think at least on the educational side, the direction of unemployment may surprise some folks.
Adult Men: Unemployment increased from 3.7% to 3.9%.
Adult Women: Unemployment held firm at 3.6%.
Teenagers: Unemployment decreased from 14.3% to 13.8%.
White: Unemployment increased from 3.6% to 3.8%.
Black or African American: Unemployment held firm at 5.7%.
Asian: Unemployment decreased from 4.1% to 3.9%.
Hispanic or Latino: Unemployment held firm at 5.1%.
Sub High School: Unemployment decreased from 6.8% to 6.6% and from 7.1% over two months.
High School Grads: Unemployment held firm at 4.0%.
Some College or Associate Degree: Unemployment held firm at 3.4%.
Bachelor's Degree & Beyond: Unemployment increased from 2.3% to 2.5%.
Wage Growth
On a year-over-year basis, hourly wage growth printed at growth of 4%, which was up from 3.9% for September after that number was revised down from 4%. Similar story for the month-over-month data. Monthly wage growth was up 0.4% from September, which was up 0.3% from August after having been revised down from an initial print of 0.4%.
An alternative measure for demand for labor among those already working full-time is average weekly hours. For October, that number printed at 34.3 hours, which makes three consecutive months of 34.3-hour average workweeks after September was revised up from 34.2%. It is important to remember that part-timers are excluded from this metric. This is full-time workweeks, so the part-timer that gets cut back from 20 hours a week to something like 10, which really happens, does not count against this number.
Markets and Policy
Equity index futures and eventually equity markets reacted quite well initially to this stunningly weak employment report. Fed Funds futures markets trading in Chicago are now pricing in a 99% probability for a 25-basis point rate cut to be made by the FOMC next week. This is up from 91% early this morning.
The market is also pricing in a likelihood of 83% for another 25-basis point rate cut in December. That likelihood stood at 69% ahead of the BLS October employment release. Futures traders also seem to be placing a 77% probability for at least another 50-basis points worth of rate cuts from January through June 2025.
Treasury markets flashes both higher and lower as mismatched algorithms missed each other but have largely returned to where they were ahead of the release, with a U.S. 10-Year Note that pays about 4.29% and a 2-Year Note yielding 4.14%. The U.S. Dollar Index shot lower at first in response to the prints but is back up to something close to the 104 level as we roll into mid-morning.
The deal is this. The Fed wanted to reduce the target range for the Fed Funds Rate to 4.5%-4.75% this coming Thursday. Now, the committee has the green light to do so without reservation, as some data-points, such as GDP, have suggested that the economy is running considerably stronger than had been expected a few months ago.
This puts the soft-landing thesis back in the box and permits the weak labor market/hard landing argument to resurface. Time will tell, but the Fed is on the clock, and the traffic light just went green.
At the time of publication, Guilfoyle had no positions in any securities mentioned.