United States: Hurricanes and Labour Disputes Dragged Down Hiring

After September's upside surprise from the establishment survey in terms of labour market strength, October's print was much less upbeat. The United States added just 12,000 jobs, the worst performance in terms of net hires since February 2019 aside from pandemic-related job losses. Looking at the private sector alone, the 28,000 jobs lost was the weakest print since February 2010 excluding the pandemic. Data from previous months was also revised downward. August was cut from 159,000 to a gain of just 78,000 and September from 254,000 to 223,000.

However, there are a few reasons for this. First, the strike at certain Boeing plants that began in mid-September probably subtracted 44,000 jobs in the manufacturing sector. The latest news about the negotiations between Boeing and its machinists is fairly encouraging, and we can expect employment to rebound once the dispute is resolved. Another crucial, albeit temporary, factor was the weather. Hurricanes Helene and Milton ripped through the United States in late September and early October, causing significant economic and labour market disruption. Unemployment insurance claims spiked in early October but have since dropped to a level similar to before the storms hit. The Bureau of Labor Statistics (BLS) doesn't formally recognize the net impact of the hurricanes on employment levels. However, according to its report, "It is likely that payroll employment estimates in some industries were affected by the hurricanes." That said, some BLS data provides further insight into the scale of the hurricanes' impact. Based on not seasonally adjusted data, 512,000 workers were unable to work due to the weather, which is a huge number for October (the average since 1990 is only 58,900). Although some businesses are certainly experiencing the long-term fallout from these hurricanes, the impact on a national level is likely to dissipate in November's job numbers. We should see a rebound, even though momentum will probably be weaker than what we anticipated before today's release.

The household survey was disappointing too, but it was clearly impacted by the same factors that negatively affected the establishment survey. Given that the household survey tends to be more volatile than the establishment survey, the loss of 368,000 jobs isn't that alarming (408,000 jobs were lost in May). The unemployment rate and weekly hours worked were both stable, providing some reassurance amid today's otherwise weak print.

At first glance, the state of the job market has changed in light of October's data. While most economic data—including jobs—was fairly strong, things now seem a little less solid. That said, October's weak hiring numbers are mostly due to temporary factors, and a rebound is likely in the coming months. Fluctuating economic indicators will probably feature heavily in discussions among Federal Reserve officials next week. Ultimately, we expect them to lower the federal funds rate by 25 basis points.