November 01, 2024
The October jobs report showed little gain in hiring, with establishments adding just 12,000 jobs. The number was depressed both by the effects of the hurricanes that hit the South last month and the loss of roughly 33,000 jobs due to the strike at Boeing. The economy has now added 15.3 million jobs since President Biden took office in January of 2021. We now have 5.9 million more jobs than at the pre-pandemic peak. (These numbers adjust for the BLS preliminary benchmark revision.)
The unemployment rate remained at 4.1 percent as hiring apparently offset any hurricane-related layoffs. The hurricanes make it more difficult to gauge the underlying strength of the labor market, but the growth would clearly have been far more rapid without the unusual events hitting the economy in October.
It is also worth noting that the response rate to the establishment survey was extraordinarily low at 47.4 percent. It is typically close to 60.0 percent, which suggests there could be large revisions when we get fuller data in the next two months.
Hurricanes Likely Hit Job Growth Primarily in Construction and Restaurants
The direct impact of the Boeing strike is easy to measure since we know the number of striking workers. (The indirect effect on supplier industries is more difficult.) The hurricanes would have both prevented hiring in some sectors and also led to some layoffs in businesses that were closed due to the storms.
It seems clear construction employment was affected by the hurricanes, as the sector created just 8,000 jobs in October after averaging almost 20,000 jobs a month in the year to September. This weakness was driven largely by a drop of 6,600 jobs in residential specialty trade contractors
Other industries likely affected by the hurricanes include restaurant jobs, where just 3,700 jobs were added compared to an average of more than 12,000 a month in the year to September. Also, amusement, gambling, and recreation which lost 7,400 jobs, and the loss of 6,400 jobs in the retail sector.
Adding in these effects, it seems likely that we would have seen at least 100,000 jobs added in October without the impact of the strike and the hurricane.
Healthcare Sector Again Led Employment Growth
The healthcare sector added 52,300 jobs in October, slightly less than the average growth of 58,000 over the year to September. The other big job gainers were state governments, which added 18,000 jobs and local governments, which added 21,000 jobs.
The government sector did not recover the jobs lost in the pandemic until September of 2023. The private sector had regained the lost jobs by April of 2022. Employment in the government sector is now 590,000, or 2.6 percent, above its pre-pandemic level.
Manufacturing Lost 46,000 Jobs, Mostly Due to Boeing Strike
The job loss in manufacturing was driven primarily by the 33,000 striking workers at Boeing. There was a drop in employment in the metal industries of 5,400, which was likely due at least in part to the strike. There was a decline in employment of 6,000 in the motor vehicle industry, although employment in the sector is still 31,500 higher than in October of 2023.
Wage Growth Remains Solid
One factor offsetting concerns about labor market weakness is that we continue to see strong wage growth. Wages have risen 4.0 percent over the previous 12 months. The pace actually accelerated slightly over the last three months, with the annualized rate of wage growth of 4.5 percent. With the rate of inflation falling towards 2.0 percent, this means that workers are seeing healthy real wage gains.
Little Change in Average Hours
Some of us expected a drop in the length of the average workweek as a result of businesses being closed by the storms. This seems not to have been the case. There was no change in the length of the average workweek or the index of aggregate weekly hours. There was a drop in the index of aggregate weekly hours for production workers, but this was driven entirely by a drop in manufacturing and construction; the index for the service sector was unchanged. It is also worth noting involuntary part-time employment actually fell somewhat in the month, hitting its lowest level since June.
Prime Age Employment Rates Fell in October
The employment to population ratios (EPOP) for prime age workers (ages 25 to 54), which had been near its all-time high, fell 0.3 percentage points to 80.6 percent. The drop was driven mostly by a 0.6 percentage point drop in the prime age EPOP for women to 74.9 percent. This is still above the pre-pandemic peak. The EPOP for men edged down 0.1 percentage point to 86.3 percent.
Share of Unemployment Due to Voluntary Quits Falls
The share of unemployment due to people leaving their job fell from 12.1 percent to 11.5 percent. The small number of people changing jobs is one of the anomalies in the current labor market. With an unemployment rate near 4.0 percent, we would expect this share to be above 14.0 percent.
We know from the JOLTS data that layoffs are relatively low, so it doesn’t seem workers have much fear of losing jobs at present. It’s possible that with the huge round of job changes earlier in the recovery workers are more satisfied with their jobs than in the past. Also we have a relatively older workforce now, and workers are less likely to change jobs in their forties and fifties than in their twenties and thirties, but this is one of the anomalies in the current labor market.
Black Unemployment Steady at 5.7 Percent
The Black unemployment rate was unchanged in October. The 5.7 percent rate in October is 0.7 pp below the recent high of 6.4 percent rate in March, but still 0.9 percent above the all-time low hit in April of 2023. It is slightly above the pre-pandemic lows.
The unemployment rate for Hispanics was unchanged at 5.1 percent. This is 1.1 pp above the all-time low of 4.0 percent in November of 2022.
Mostly Bright Picture, but Hurricanes Make it Hard to Read
This is the last major data release before the election. The economy’s performance under the Biden-Harris administration has been remarkable by most standard measures. The pandemic inflation that drove prices higher across the globe has been brought down and is now nearly back to the Fed’s 2.0 percent inflation target. With wage growth near 4.0 percent, wages are now outpacing prices by a substantial amount.
Clearly much of the weakness in the establishment survey is attributable to the hurricanes. It’s also not clear how many jobs we should be creating at this point. Before the pandemic, the Congressional Budget Office projected we would create just 20,000 jobs a month in 2024, as baby boomers retired in large numbers. The surge in immigration changed that picture, but with immigration now slowed, we will surely see much slower job growth ahead than earlier in the recovery.
