October Job Gains Come Up Short

U.S. employers added just 12,000 new jobs in October, far less than what most economists had expected, according to the latest employment report from the U.S. Bureau of Labor Statistics. Payroll growth slowed to its weakest pace since December 2020 as the impacts of hurricanes in the Southeast and labor strikes dampened employment.

Much of the payroll employment decline appears to have been driven by the ongoing Boeing strike and potentially the significant impacts of Hurricanes Helene and Milton, explained Justin Ladner, senior labor economist at SHRM.

But “Job growth remained strong in health care and government, and the unemployment rate held steady,” he said. “Furthermore, labor market evidence from earlier this week continues to suggest that the overall labor market remains strong. From a policy perspective, there was already widespread belief that the Fed will pursue a series of gradual interest rate cuts in the remainder of 2024 and throughout 2025, and this latest report should only reinforce that policy.”

Economists agree that signs of a softer jobs market will likely lead to the Federal Reserve lowering interest rates next week for the second time in four years.

The weak October report also included substantial downward revisions from previous months. August was revised down by 81,000 jobs to a gain of 78,000 while September’s initial estimate was cut down by 31,000 jobs to 223,000. Together, the net revisions lowered previously reported job creation totals by 112,000.

The jobs numbers are no cause for alarm, said Edward Hearn, lead economist at UKG.

In addition to September’s solid employment gains, UKG reporting saw disruptions to working activity as they occurred last month in the areas affected by the hurricanes and have seen recovery to normal levels since then.

“We expect that revisions to the BLS surveys for this month will paint a clearer picture of recovering employment moving forward,” he said.

Ger Doyle, head of Experis North America, one of the largest recruiters of tech talent in the U.S., said that the jobs count freefall is likely temporary. “Our real-time data shows a nuanced picture of the labor market with both short-term challenges and long-term resilience,” he said. “Overall, the outlook for the labor market remains positive, and with a soft landing for the economy appearing likely with inflation continuing to cool, cautious employers may begin to hire more broadly in other sectors.”

Storms and strikes are not the only culprits in this story, said Julia Pollak, chief economist at ZipRecruiter. “Today’s weaker-than-expected jobs report also reflects the continued labor market cooldown which has taken place since the Fed began raising interest rates more than two years ago,” she said. “The report is broadly consistent with the big picture that has emerged over the past two years—a labor market that is growing but slowing, and where growth is increasingly narrowly concentrated.”

Pollak pointed out that recent quarterly net job gains have come in below their prepandemic average and that all job gains have come from “just four supersectors that together account for just half of the U.S. workforce.”  

Cory Stahle, an economist at the Indeed Hiring Lab, said that if future reports are similarly weak, with limited job gains and persistent downward revisions to prior data, then that will be a real cause for concern. “But for now, a soft landing is still on the table, though it will require stronger job gains and steady unemployment in the coming months.”

Pollak said that normalizing interest rates will likely lead to a rebound in the labor market and pickup in hiring. “But job gains won’t appear everywhere at once. Interest-sensitive sectors—like finance and tech—could feel the boost first. Other sectors may take longer to respond as lending flows unevenly across industries.”

Noah Yosif, chief economist at the American Staffing Association, said that unemployment remains low, and wages continue to outpace inflation, providing affirmation that the labor market is cooling, but not at an alarming rate.

Amy Glaser, senior vice president at staffing and recruiting firm Adecco, said their business is showing continued demand from employers, particularly in the hospitality/leisure and health care industries. “As we enter the holiday season, we expect many employers to continue to bolster their workforce, which should help the labor market bounce back for the remainder of 2024,” she said.

The October jobs report comes just days ahead of the 2024 presidential election in which Democrat Kamala Harris and Republican Donald Trump are in a tight race and each is attempting to define the economic landscape.

Industry Breakdown

The health care and government sectors led job creation, respectively adding 52,000 and 40,000 positions. Several sectors, however, reported job losses.

“The big three job generators since June 2023—health care, leisure and hospitality, and state and local government—posted mixed results,” said Diane Swonk, chief economist and managing director at KPMG.

She added that while health care continued to dominate job gains, and public sector employment accelerated last month, leisure and hospitality shed 4,000 jobs. “The largest losses occurred in amusement parks and gambling establishments, which were shuttered by hurricanes,” she said. “Look for those jobs to come back in November as many are already reopened.”

Swonk said that wholesale trade jobs increased by 10,000, while retail trade fell by 6,400, with many retailers idled by the storms as well. “Separately, the largest retailers have announced plans to scale back or match the number of holiday hires in 2023,” she said.

“As we move deeper into the holiday retail season, demand is varied but softer compared to previous years,” Doyle said. “Technical sales positions are the top in-demand role, indicating a shift toward specialized skills. In contrast, retail salespeople and stocker roles are not seeing the same push in demand.”

Pollak said that holiday hiring is largely on track, although the jobs have continued to shift from traditional retail to ecommerce-related sectors.

Manufacturing employment decreased by 46,000 in October, reflecting a decline of 44,000 in transportation equipment manufacturing that was largely due to strike activity.

“Manufacturing employment growth suffered a severe contraction this month, the single biggest drop since the pandemic-impacted April 2020,” said Sam Kuhn, a labor economist at Appcast. “While the strikes are likely to end soon and the immediate impact will dissipate, the story remains the same for manufacturing—employment growth has been weak throughout 2024 as the industry has been suffering under the weight of elevated interest rate costs.” 

Businesses continue to be cautious about expanding their workforce, likely due to economic uncertainties or cost-control measures, Doyle said. “However, we’re still seeing growth above 2023 levels which provides moderate optimism for the market as economic conditions stabilize.”

Within professional and business services, employment in temporary help services declined by 49,000 in October. Temporary help services employment has decreased by 577,000 since reaching a peak in March 2022.

“The drop in demand for temporary help services highlights the continued paralysis in labor churn, which could start to affect more areas of the economy if high borrowing costs continue,” Yosif said.

Unemployment Holds

The unemployment rate in October remained at 4.1%, in line with expectations. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons also was unchanged at 7.7%.

“The unemployment rate has been stable for a few months now after gradually climbing in the first half of the year,” Stahle said. “The share of workers with a job, also called the employment-to-population ratio, fell slightly in October but remains above pre-pandemic levels. This suggests that the supply of labor remains healthy, and that people are still being drawn into the labor market.”

Swonk noted that there was a slight drop in labor force participation, from 62.7% to 62.6%. “The hurricanes no doubt suppressed participation given the size of disruptions,” she said. “Prime-age women were hit particularly hard. Their participation rate dropped to 77.8%, the lowest since March. Teens were sidelined as well.”

She also pointed out that the number of long-term unemployed (1.6 million) fell slightly, but has moved up significantly from a year ago (1.3 million), suggesting that in this current market “it is harder to find a job once you lose a job.”