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The US economy added just 12,000 new positions in October, in by far the weakest jobs report of the Biden administration, as the closely watched number was hit hard by hurricanes and the Boeing strike.
Friday’s figure, published by the Bureau of Labor Statistics just four days before the US election, was far below the average forecast of 100,000 job gains in a poll of economists by Bloomberg.
It also fell far short of September’s downwardly revised figure of 223,000 new jobs. But in a sign of the underlying strength of the US labour market, the unemployment rate remained 4.1 per cent.
“We’re still seeing a labour market that’s struggling to find its footing,” said Sarah House, senior economist at Wells Fargo, who referred not just to the impact of the hurricanes and the strike but also to the “pretty weak” revised figures for the previous two months.
“The jobs market is still strong but it’s not overheated any more either.”
The latest data cemented market expectations of a quarter point Federal Reserve rate cut next week. Before the figures were published, futures traders had priced in a small chance rates would be held at the central bank’s meeting on Thursday.
Ajay Rajadhyaksha, global chair of research at Barclays, added that, following publication of the October jobs figures, markets now saw a 0.25 percentage cut in December as “definitely on the cards”.
US government bond yields dropped from three-month highs immediately after the report, reflecting falling interest rate expectations.
The policy-sensitive two-year Treasury yield, which moves inversely to prices, fell 0.05 percentage points to 4.12 per cent after the payroll figure was published, reversing its previous direction.
Stock futures extended their gains, with contracts tracking Wall Street’s S&P 500 trading 0.4 per cent higher and those tracking the tech-heavy Nasdaq 100 also up 0.4 per cent.
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“We expected the jobs report to certainly be softer in relation to prior months, just due to distortions created by hurricanes and strikes,” said Mark Cabana, head of US rates strategy at Bank of America.
But he added: “That said, it was softer than our economists’ expectations — and it does appear as though it is consistent with a softening overall labour market.”
The jobs report was the last big US economic data release before Tuesday’s presidential election. The economy is a central theme in the contest as vice-president Kamala Harris, the Democratic contender, struggles to overcome voters’ discontent about the cost of living.
The Biden administration has argued that it has brought down inflation as well as overseen a booming recovery in the labour market.
Harris was marginally less trusted on the economy than her Republican rival Donald Trump, according to the final monthly poll for the Financial Times and the University of Michigan’s Ross School of Business.
The October jobs data was gathered during the week that Hurricane Milton made landfall in Florida and shortly after Hurricane Helene slammed the south-east of the US.
A continuing strike at Boeing, in which 33,000 employees have stopped working, also dragged the figure down.
The BLS said the hurricanes had affected jobs growth but said it was “not possible to quantify the net effect” on the monthly change in employment, hours worked or wage gains. It added that survey responses were “well below average” for the jobs report.
Many economists expected a drag of around 40,000 positions from the storms alone.
Manufacturing employment fell by 46,000 in October, the vast majority of which was tied to the transportation equipment sector, which was directly affected by the strikes.
The construction industry, retail, leisure and hospitality and financial sectors all also recorded little or no jobs growth.
Overall, payrolls growth in the private sector fell by 28,000 positions.
As inflation has slowed in recent months, the Fed has become increasingly focused on protecting the labour market.
In an effort to achieve a “soft landing”, in which inflation returns to the Fed’s 2 per cent target without triggering a recession, officials are trying to lower rates to a “neutral” level that does not hamper growth.
Policymakers and economists appear increasingly optimistic about such an outcome, and have signalled they expect the downward distortion of October’s payrolls figure to fade away with the impact of the strike and the hurricanes over time.