Key takeaways
The economy created a mere 12,000 new jobs in October, the lowest monthly job growth since late 2020.
The unemployment rate held steady for the second consecutive month at 4.1%.
The Federal Reserve is closely scrutinizing job market data in determining monetary policy.
In October, the nation’s labor market showed signs of softening, though it wasn’t clear to what degree extenuating circumstances resulted in the disappointing numbers. Dating back to January 2024, the economy Has created an average of 170,000 jobs per month. In October, there was virtually no job growth, with just 12,000 positions created, the smallest monthly gain since late 2020. The U.S. Bureau of Labor Statistics also revised nonfarm payroll employment growth lower for the prior two months.1 October’s weakness may be attributed, in part, to the impact of two major hurricanes (Helene, Milton) and a strike by 33,000 workers at the aerospace company Boeing.
“Hurricanes and labor issues can play a role in tempering employment numbers,” says Rob Haworth, senior investment strategy director for U.S. Bank Asset Management. “However, October’s numbers certainly came in lower than market expectations.”
More stability was evident in the nation’s unemployment rate, which stood at 4.1% for the second consecutive month. While below the reported July and August rates, it also reflects the fact that the size of the labor force declined modestly in October, generally considered an unfavorable trend.
The disappointing non-farm payroll employment data represented a sharp turnaround from September’s much stronger report. Job growth has slowed, as the economy, between August and October, generated on average just 100,000 new jobs per month.2
“Markets generally have little concern with revisions of past job growth numbers,” says Haworth. “That data is not market-moving because it is so far in the rearview mirror. Markets are more concerned with the direction the economy is headed.”
October’s payroll numbers included growth in new health care and government jobs. However, this was offset by significant reductions in temporary help services and manufacturing employment.1
At 4.1%, unemployment remains below July’s peak 4.3% level.1 “When taking a more historical view of the unemployment rate, a number in the low 4% range is quite favorable,” says Haworth.
The unemployment rate held below 4% from February of 2022 through April 2024, but then in May, crossed the 4% threshold.2
The number of open positions compared to available workers, which previously was significantly imbalanced with far more jobs than workers, recently leveled off. At the end of September, according to the U.S. Bureau of Labor Statistics, there were 7.4 million job openings in the U.S., compared to 6.4 million unemployed persons.3
One measure economists watch to forecast potential changes in labor market trends is the weekly new jobless claims report. In the most recent report, initial jobless claims stood at 216,000 for the week ending October 26, 2024. This is down from a 2024 high of 260,000 jobless claims, reported in early October.4 “If you look at long-term history, sub-300,000 initial weekly jobless claims is considered a fairly healthy level for the economy,” says Haworth.
“Hurricanes and labor issues can play a role in tempering employment numbers,” says Rob Haworth, senior investment strategy director for U.S. Bank Asset Management. “However, October’s numbers certainly came in lower than market expectations.”
Markets also track the labor force participation rate, considered a key barometer of the broader economy's health. This number hasn’t changed much over the past year, and in October, dropped slightly to, 62.6%, below its level the prior three months.1 “Improving labor participation is one way to address tightness in the labor market that’s propping up wage gains,” says Matt Schoeppner, a senior economist at U.S. Bank.
According to the October jobs report, average hourly earnings have increased 4% over the past year, a number that over the past two years has held fairly steady.1
The Federal Reserve (Fed) recently adjusted its interest rate policy, which was designed to slow economic growth and lower inflation. After raising rates from near 0% to 5.50%, and then, for more than a year, maintaining rates at that level, the Fed in September implemented a 0.50% rate cut. It was a signal that the Fed views inflation as a receding problem for the economy. The Fed has indicated that concerns about labor market weakness are an increasing focus of its monetary policy, and it projects more rate cuts in the coming months.5
Investors continue to closely track jobs data as key economic indicators and how they may signal potential Fed interest rate cuts. Fed rate cuts are considered a way to boost the economy, help support the stock market rally that began in 2023, and also benefit the bond market.
Talk with a wealth professional if you have questions about your personal financial circumstances or investment portfolio.
The job market refers to the marketplace where individuals seek work and employers seek workers. The strength of the job market is considered one important measure of the current health of the broader economy. If more jobs are being created and demand for labor is high, it tends to reaffirm the presence of an expanding economy. By contrast, higher unemployment levels and low job growth (or a decline in job growth) indicate a slowing economy.
The unemployment rate, reported monthly by the U.S. Bureau of Labor Statistics, provides significant insight into the health of the nation’s economy. Generally, the lower the unemployment rate, the stronger the economy is likely to be. The unemployment rate is also one of the mostly closely followed indicators. It’s important to note that the unemployment rate reflects people who are out of work but still seeking employment. It does not reflect others who have stopped looking for work or consider themselves no longer in the labor force.
When the unemployment rate moves higher, it indicates potential weakening of the economy. Consumers may consider holding back on purchases if they have concerns that they, themselves, could face unemployment in the near future. If that occurs, it can potentially contribute to further economic weakness. When unemployment is low, it’s a good indicator that the economy is strong and expanding.
The Federal Reserve has started easing monetary policy by cutting interest rates. Does this mean the threat of a recession has receded?
With inflation retreating and more interest rate cuts likely, how should investors position their portfolios to capitalize on potential opportunities, while guarding against risks?
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