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Well, I warned you . . . .I expected a downdraft from the hurricanes, especially Milton, and also the Boeing strike. And boy did we get one!Let me be clear: if there were no special factors, this report would be recessionary, period. And there were some signs of real weakness in this report that do not appear to be hurricane-related. But Hurricane Milton, as well as the strike, had an impact, so take this report with a gigantic helping of salt.Here is what the BLS had to say in releatant part:“Hurricane Milton struck Florida on October 9, 2024, during the reference periods for both surveys. Prior to the storm’s landfall, there were large-scale evacuations of Florida residents.“In October, the household survey was conducted largely according to standard procedures, and response rates were within normal ranges.“The initial establishment survey collection rate for October was well below average. However, collection rates were similar in storm-affected areas and unaffected areas. A larger influence on the October collection rate for establishment data was the timing and length of the collection period. This period, which can range from 10 to 16 days, lasted 10 days in October and was completed several days before the end of the month.“…. It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect[s] … because the establishment survey is not designed to isolate effects from extreme weather events. There was no discernible effect on the national unemployment rate from the household survey.”Below is my in depth synopsis.
Headlines:
12,000 jobs added. Private sector jobs *declined* -28,000. Government jobs increased by 40,000.
The pattern of downward revisions to the last two months resumed. August was revised down ward by -81,000, and September by -31,000, for a net decrease of -112,000.
The alternate, and more volatile measure in the household report, showed a decrease of -368,000 jobs. On a YoY basis, this series has only risen by 216,000 jobs, which remains consistent with recession, as it has for months. On the other hand, it is an improvement from two months ago, where there was an actual YoY decline.
Surprisingly, the U3 unemployment rate remained steady at 4.1%, which also means the “Sahm rule” recession indicator is no longer in effect. The rounding of data was particularly important this month. If we go out a couple more decimal points, the rate increased from 4.051% in September to 4.145% – almost a 0.1% increase.
The U6 underemployment rate also remained steady at 7.7%, still 1.3% above its low of December 2022.
Further out on the spectrum, those who are not in the labor force but want a job now declined -31,000 to 5.666 million, vs. its post-pandemic low of 4.925 million in early 2023.
Leading employment indicators of a slowdown or recessionThese are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. This month they were almost all negative:
the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 40.6 hours. This remains down -0.9 hours from its February 2022 peak of 41.5 hours, but on the other hand is only -0.2 hours below its 18 month high.
Manufacturing jobs declined -46,000. This is the second month in a row for this decline.
Within that sector, motor vehicle manufacturing jobs declined -6,000.
Truck driving declilned -100.
Construction jobs increased 8,000.
Residential construction jobs, which are even more leading, rose by 1,300 to another new post-pandemic high.
Goods producing jobs as a whole declined -37,000. Because these typically decline before any recession occurs, in the absence of special factors this would be a serious red flag for oncoming recession.
Temporary jobs, which have generally been declining late 2022, fell by another -49,000, and are down -577,000 since their peak in March 2022. This appears to be not just cyclical, but a secular change in trend.
the number of people unemployed for 5 weeks or fewer declined -34,000 to 2,112,000.
Wages of non-managerial workers
Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.12, or +0.4%, to $30.48, for a YoY gain of +4.1%. Their post pandemic peak of 7.0% in March 2022. This was also 0.2% higher than their recent low in July. Most importantly, this continues to be significantly higher than the 2.4% YoY inflation rate as of last month.
Aggregate hours and wages:
the index of aggregate hours worked for non-managerial workers *declilned* -0.3%, but remains up 1.1% YoY, only slightly below its trend for the past 12+ months.
the index of aggregate payrolls for non-managerial workers was rose 0.1%, and is up 5.2% YoY. These have been slowly decelerating since the end of the pandemic lockdowns, and that trend continued this month, which was just slightly above the post-pandemic low. Nevertheless, with the latest YoY consumer inflation reading of 2.4%, this remains powerful evidence that average working families have continued to see gains in “real” spending money.
Other significant data:
Professional and business employment fell -47,000. Moreover, there were significant revisions to this series, which now show a relentless decline for the last five months. These tend to be well-paying jobs. As of this month, they are only higher YoY by 0.1% – a very low increase that has *only* happened in the past 80+ years immediately before, during, or after recessions.
The employment population ratio declined -0.2% to 60.0%, vs. 61.1% in February 2020.
The Labor Force Participation Rate declined -0.1% to 62.6%, vs. 63.4% in February 2020. The prime 25-54 age participation rate declined -0.3% to 83.5%, vs. 84.0% in July, which was the highest rate during the entire history of this series except for the late 1990s tech boom.
Of particular importance this month is the change in those on temporary layoff, up 214,000, vs. permanent job losers, up 153,000. This suggests that about 60% of the negative news this month was transient, but about 40% of the decline was more structural.
Summary:To reiterate what I said in the opening, if there were no special factors, this report would be outright recessionary. Private jobs declined, manufacturing declined, motor vehicle production and trucking employment declined, goods producing jobs as a whole declined, professional and business jobs declined; and finally, the unemployment rate, before rounding, rose 0.1%. This is recessionary.While -44,000 of that decline appears to have been the strike at Boeing, now resolved, on the other hand, leisure and hospitality jobs, of which Florida has plenty, only declined -4,000 in October. And the downward revisions to professional and business jobs are very concerning. Again, to reiterate my last bullet point above this summary, as a back of the envelope estimate, I would take 60% of this month’s decline as temporary, but 40% real. Since this report showed a -211,000 decline in new jobs from September’s +223,000 pace, my best guess as to what this report would have shown in the absence of Milton and the Boeing strike is an increase of +127,000 jobs.More By This Author:
