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U.S. employers added just 12,000 jobs in October

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Employers added just 12,000 new jobs in October as hiring fell significantly. The total was expected to be dampened by two hurricanes in the Southeast and several worker strikes, but the figure was far lower than expected and job gains for previous months were revised sharply downward, raising concerns about a slowdown in the labor market.

The report offers a final picture of the economy just days before the historic election and the Federal Reserve's key meeting next week. But the temporary hurdles will likely make it difficult for Fed officials to get a handle on the underlying health of the labor market, economists said.

The unemployment rate remained stable at 4.1%, the Labor Department said Friday.

Before the report was released, economists surveyed by Bloomberg estimated that 105,000 new jobs were added in October.

Also worrying: wage increases for August and September were revised downwards by a whopping 112,000. Additions in August were downgraded from 159,000 to 78,000 and in September from 254,000 to 223,000.

How did hurricanes affect the economy?

Oxford Economics estimates that hurricanes Helene and Milton likely reduced employment in the Southeast by about 70,000 last month. Goldman Sachs expected a smaller impact of 40,000 to 50,000 jobs. Hurricane Helene hit Florida's Gulf Coast on Sept. 26, well before the Labor Department conducted its jobs survey, the agency noted, but Milton struck the week of the survey.

Across the region, the number of stores open, the number of employees and hours logged fell by about 9%, according to Homebase, a maker of workforce scheduling software.

Meanwhile, an ongoing strike at Boeing – along with smaller strikes at Textron, an aerospace parts maker, and Hilton Hotels – is likely to have reduced the number of workers by around 40,000, according to research firm Nomura.

All told, the storms and strikes may have reduced job gains by about 100,000, forecasters estimate.

In which sectors is employment growing?

Health care led the meager gains in August with 52,000 jobs, while the government added 40,000. Other industries shed jobs or added only a few. Professional and business services lost 47,000 jobs due to a decline in temporary employment. Manufacturing lost 46,000 jobs, largely due to the Boeing strike. Leisure, hospitality and construction were virtually stagnant amid the storms.

Are wages increasing or decreasing?

Average hourly wages rose 13 cents to $35.46, keeping the annual increase at 4%.

As pandemic-related labor shortages have eased, wage increases have slowed. Economists say annual wage growth should slow to 3.5% to meet the Federal Reserve's 2% inflation target.

This week, a separate barometer of wage growth that economists consider more accurate, the so-called employment cost index, showed that private sector wages rose 3.8% in the third quarter, the slowest pace in three years.

How much will the Fed cut interest rates?

With the impact of the storms uncertain, Barclays said ahead of the report that the Fed was unlikely to read too much into October's unusually weak jobs numbers. However, a surprisingly high number may have prompted the central bank to postpone a planned interest rate cut until December, the research firm said.

In September, the Fed cut its key interest rate by a hefty half percentage point – the first cut since 2020 – as inflation eased and job growth slowed sharply in August. The Fed lowers interest rates to stimulate borrowing activity and a sluggish economy, or normalizes interest rates when inflation eases. Fed officials aggressively raised interest rates in 2022 and 2023 as inflation hit a 40-year high of 9.1%.

However, in September employers created well over 200,000 jobs and the figures for previous months were revised upwards. And data this week showed the economy grew at a healthy annual rate of 2.8% in the third quarter as consumers continued to spend. A continued strong economy and labor market could prompt the Fed to pause its rate cuts to prevent inflation from rising again.

Assuming the labor market continues to cool gradually, many forecasters expect the Fed to continue its tentative plans to cut interest rates by a more modest quarter point in November, December and at every other meeting next year.

How is the US job market currently?

Overall, employment growth has been solid despite high interest rates and inflation, as strong wage increases boost consumption. A wave of immigrants has filled vacancies and further boosted spending.

But the influx of immigrants that supports labor force growth is slowing, Goldman Sachs said. At the same time, the government and health care sectors, which have supported U.S. job growth for months, have finally increased payrolls close to, as would have been the case without the pandemic, Goldman said. As a result, they are now creating new jobs more slowly.

Job creation is expected to decline significantly by next year, at a pace that should help contain inflation while avoiding a recession.

This story has been updated to add new information.

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