U.S. Employment (October 2024)

Payrolls disappoint in October, but unemployment rate holds steady at 4.1% 

• Non-farm employment rose a meager 12k in October, well below the consensus forecast calling for a gain of 100k. Job gains over the two prior months were revised lower by 112k.
  
  • The Bureau of Labor Statistics noted that Hurricane's Helene and Milton "likely" affected estimates in some industries, though did not provide any point estimates. 
  • Over the past three months, payroll gains averaged 104k, well below the 194k averaged over the prior twelve-month period. 
• Private payrolls were lower by 28k in October, with the largest declines seen in professional & business services (-47k) – all related to a pullback in temporary help (-48.5k) - and manufacturing (-46k), though this was largely due to the ongoing Boeing strike. Meanwhile, education & healthcare (+57k) and government (+40k) recorded solid gains last month. Job creation across most other industries was relatively flat. 
• In the household survey, a sharp decline in civilian employment (368k) largely offset a pullback in the labor force (-220k), keeping the unemployment rate steady at 4.1%. The labor force participation rate fell 0.1 percentage points to 62.6%. 
• Average hourly earnings (AHE) rose 0.4% month-on-month (m/m), a modest acceleration from September's downwardly revised reading of 0.3% m/m. On a twelve-month basis, AHE were up 4.0% (from 3.9% in September).

Key Implications

• Between the ongoing Boeing strike and the devastating impacts of Hurricane's Helene and Milton, we knew this was going to be messy employment report. While the Bureau of Labor Statistics didn't provide any point estimates of hurricane impacts, they did note that the storms "likely" had some impact on last month's figures. Putting that aside, revisions to prior months were meaningfully lower, which on top of October's disappointing reading pulled the three-month moving average down to 104k, well below what's required to meet current growth in the labor force. However, given the various factors impacting last month's numbers, it's too early to draw any meaningful conclusions from today's report. 
• Other data out this week continued to point to a labor market that is decelerating but not necessarily deteriorating. Job openings continued to trend lower in September while hire and quit rates are now at or below pre-pandemic levels. This has helped to pressure compensation growth lower, with the Employment Cost Index slowing to 3.9% on a year-ago basis in the third quarter. Amid the ongoing pickup in productivity, this suggests the Fed's preferred wage metric is now growing at a pace broadly consistent with 2% inflation. This should give policymakers all the confidence they need to gradually reduce the policy rate by quarter-point increments at each of its upcoming meetings.

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