United States: Hiring Comes Back Down to Earth

After September's blowout print—which was revised from 336,000 to 297,000—October's 150,000 jobs added brings us back to a more normal situation. This is just below the June–August average of 168,000 and well down from the early-year average of 287,000.

However, this slowdown is partly due to the impact of the automotive sector strike. As the strike began on September 15, it didn't affect that month's establishment survey, but October has now taken the full brunt of the impact. The strike caused a net loss of 33,200 jobs in the motor vehicle manufacturing sector. Now that the standoff is unofficially over (the strike has been called off waiting for the new contracts to be approved), we can assume that we'll see a rebound in November's data.

But what about the rest of the US economy? Excluding the automotive sector, manufacturing is flat. Construction improved slightly between September and October, which is surprising amid extremely high mortgage rates. Services industry hiring slowed sharply, but September's 218,000 jobs added is more of an outlier than October's 110,000. Only 52.0% of the 250 sectors surveyed reported expanded payrolls in October, compared to 61.4% in September and an average of 56.2% for the three previous months. Job creation is a little slower, but above all less broad-based.

October's household survey provides a major contrast, showing a contraction rather than weaker labour market growth. According to this survey, 348,000 jobs were lost in October—the worst print since March 2018 excluding the early days of pandemic. However, the household survey is much less reliable. To be significant, monthly movements must be greater than ±600,000 jobs, whereas the threshold for the establishment survey is ±130,000. The 201,000 decrease in the labour force mitigated the impact of the decline in employment (as per the household survey) on the unemployment rate, which edged up 0.1% to 3.9%. However, it has increased by 0.5 percentage points from its April low of 3.4%.

Average hourly earnings were up 0.2% month-over-month and 4.1% year-over-year, the lowest prints since February 2022 and June 2021 respectively, and further evidence that the labour market is cooling.

September's hiring spree looks increasingly like an outlier and October's print appears more representative of the economy. These latest figures should reassure Fed officials in their decision to extend their interest rate pause.