In October, businesses created only 12,000 new jobs, indicating a significant slowdown in hiring. This figure was anticipated to be much higher.

Despite being affected by two hurricanes in the Southeast and various worker strikes, the job growth figures were significantly below expectations. Additionally, revisions to prior months’ job gains showed a sharp decline, sparking worries about a potentially weakening labor market.

This report paints a final picture of the economy just days ahead of next week’s landmark election and an important Federal Reserve meeting. Economists suggest that these temporary obstacles may complicate Fed officials’ efforts to accurately assess the true health of the labor market.

The unemployment rate remained unchanged at 4.1%, according to a report from the Labor Department released on Friday.

Prior to this announcement, economists surveyed by Bloomberg had predicted an increase of 105,000 jobs in October.

Additionally, there were concerning revisions for payroll gains in August and September, which were decreased by a significant total of 112,000 jobs. Specifically, the job additions for August were revised down from 159,000 to just 78,000, while those for September went from 254,000 down to 223,000.

What was the economic impact of hurricanes?

According to estimates by Oxford Economics, Hurricanes Helene and Milton likely led to a decrease of around 70,000 jobs in the Southeast last month. In contrast, Goldman Sachs predicted a lower job loss figure ranging from 40,000 to 50,000. Although Hurricane Helene struck Florida’s Gulf Coast on September 26—prior to the Labor Department’s job survey—the impact of Hurricane Milton was felt during the survey week.

the area, there was a roughly 9% decrease in the number of active businesses, employees on payroll, and logged working hours, as reported by Homebase, a company specializing in employee scheduling software.

At the same time, a persistent strike at Boeing—coupled with smaller strikes at Textron, which manufactures aerospace parts, and Hilton Hotels—likely reduced payroll numbers by approximately 40,000 jobs according to research from Nomura.

Overall estimates suggest that the combination of storms and strikes may have led to a reduction of around 100,000 job gains.

There’s no doubt that both hurricanes and strikes have had an impact on employment figures.

The jobs report showed disappointing figures as about 512,000 individuals reported they couldn’t work due to weather conditions, while the typical number is around 32,000, according to economist Bradley Saunders from Capital Economics. Additionally, only 47% of businesses participated in the survey, marking a record low of 33%.

He also pointed out that the labor market is showing signs of slowing down.

“The modest increase of just 12,000 in non-farm payrolls was significantly below both our expectations and those of experts,” Saunders remarked. He noted that this shortfall was “partly influenced by disruptions from hurricanes.”

Regarding the Boeing strike, it was estimated that temporary challenges reduced payroll increases by around 90,000. This implies that, without these challenges, employers would have still added approximately 102,000 jobs. This figure is significantly lower than the average of 148,000 jobs created during the previous three months, which also faced some impact from hurricanes—although those were less severe.

Which industries are seeing job growth?

In August, health care emerged as the sector with the most job additions, contributing 52,000 new positions. The government sector also saw a rise of 40,000 jobs. Meanwhile, various other industries either lost jobs or made minimal gains. Specifically, professional and business services experienced a loss of 47,000 positions due to a reduction in temporary staffing roles.

Manufacturing faced a significant decline with the loss of 46,000 jobs, primarily attributed to the Boeing strike. Meanwhile, sectors like leisure and hospitality as well as construction showed little change due to adverse weather conditions.

Average hourly wages increased by 13 cents, reaching $35.46, which maintains an annual growth rate of 4%. As the worker shortages caused by the pandemic have lessened, the pace of wage increases has also decreased. Economists suggest that annual wage growth is expected to slow down to around 3.5% in order to align with goals set by the Federal Reserve.

This week, another measure of wage growth that economists consider to be more reliable, known as the employment cost index, indicated that wages in the private sector increased by 3.8% during the third quarter. This marks the slowest growth rate seen in three years.

What will happen with Fed interest rates?

Due to the unpredictable impact of recent storms, Barclays noted prior to the report that the Federal Reserve is likely to take a cautious approach and not overinterpret an unexpectedly low jobs figure for October.

Despite concerns regarding the unexpectedly low job numbers, Saunders mentioned that the Fed “will look through the noise” and is likely to implement a cautious quarter-point rate cut at their upcoming meeting, especially considering that other recent economic indicators have been positive.

In September, the Fed made a significant move by reducing its key interest rate by half a percentage point – marking its first cut since 2020. This decision was influenced by declining inflation and a sharp slowdown in job growth observed in August. The Fed typically lowers rates to stimulate lending during an economic slump or to normalize rates as inflation decreases. In 2022 and 2023, Fed officials had raised interest rates aggressively.

Inflation has reached its highest level in 40 years, peaking at 9.1%.

However, in September, companies added more than 200,000 jobs. Recent data also showed that the economy expanded at a robust annual rate of 2.8% in the third quarter, driven by strong consumer spending. A consistently strong job market and economy might prompt the Federal Reserve to hold off on rate cuts to prevent a resurgence of inflation.

As the market continues to cool off gradually, many analysts anticipate that the Fed will likely proceed with plans to reduce rates by a modest quarter point in November, December, and at each subsequent meeting next year.

What is the current state of the US job market?

Generally speaking, job growth remains strong despite elevated interest rates and inflation, as significant wage increases support consumer spending. An influx of immigrants has filled available positions and further boosted expenditure.

However, Goldman Sachs indicates that the pace of immigration contributing to labor force growth is beginning to slow down. Meanwhile, both government and healthcare sectors.

According to Goldman, the industries that have supported U.S. employment growth for several months are now stabilizing payrolls to levels similar to where they would be without the pandemic. Consequently, these sectors are creating jobs at a slower pace.

This shift is anticipated to lead to a significant reduction in job creation into next year, which should help manage inflation while steering clear of a recession.

(This story has been updated with new information.)