Hiring Likely Took Big Hit In October

The job market likely slowed down in October, partly because of the impacts of hurricanes Helene and Milton.

A highly anticipated report on the job market from the Bureau of Labor Statistics Friday will likely show U.S. employers added 110,000 jobs in October, a sharp slowdown from 254,000 in September, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. The median forecast calls for the unemployment rate to hold steady at 4.1%, not a high level by historical standards but above the 50-year lows reached last year.

The deceleration in job growth could represent the impact of hurricanes Helene and Milton, which temporarily threw many people out of work. This could make it more challenging than usual for experts to determine what the monthly report says about the longer-term health of the job market and the economy.

The October report comes at a crucial time: it will be the last major economic report before the general election and the Federal Reserve policy committee’s next meeting in November. At that meeting, officials must decide whether and how much to cut the central bank’s key fed funds rate to help boost the economy and prevent a spike in unemployment.

Fed officials cut the influential fed funds rate at their last meeting in September after months of economic data showed inflation is cooling while the job market is slowing down. The Fed had held the rate at a two-decade high, pushing up borrowing costs on all kinds of loans to subdue the surge of inflation that welled up in 2021 as the economy reopened from the pandemic. The Fed cut rates partly out of concern that a recent hiring slowdown could worsen and lead to severe layoffs.

Why The Jobs Report Matters

Official reports of the job market are a crucial barometer for the Fed, which seeks to keep employment at a high level while also keeping a lid on inflation.

Should job creation grind to a halt or reverse itself, the Fed could cut the fed funds rate faster and further. Steep rate cuts would push down interest rates on all kinds of loans, including mortgages, credit cards, and car loans, possibly boosting the economy and the job market.

Should the report match expectations, the slowdown wouldn’t be enough to spur faster rate cuts, several economists said. Financial markets are pricing in a 94.8% chance the Fed will cut the fed funds rate by 0.25 percentage points at their next meeting to a range of 4.5% to 4.75%, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

In addition to the hurricanes, a strike at Boeing throws another wild card into the data, potentially reducing the hiring figures further. Given all the noise, it might take a major deviation from expectations to shift Fed officials from the path of slow-and-steady rate cuts that markets currently anticipate.

“We expect policymakers will look past modest surprises in this report,” David Seif, chief economist for developed markets at Nomura, wrote in a commentary.

If forecasts are accurate, October would be one of the slowest months of job creation in the last three years. The U.S. economy has added jobs every month since January 2021, and only one month (April 2024) gained fewer than 110,000 since then.