October Jobs Report: Spooktacular

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s Chief Economist Aaron Terrazas.

Fall is usually a season of extremes – summer-like one day, an arctic chill the next. The October jobs market appears to match the season: Spooktacular – both frightening and extraordinary.  Payroll employment grew by 150,000 in October – exactly in line with expectations, though clouded by ongoing strikes mid-month – and the unemployment rate ticked higher to 3.9 percent.

Payroll Employment Growth Cools Amid Strikes

Employers added 150,000 jobs to payrolls in October, down from 297,000 in September (initially reported as 336,000). August payrolls were also revised down to +165,000 from +227,000. It will be easy to look past the weak October payroll number, which was muddied by the estimated 48,100 workers on strike during the first half of October (the highest monthly number since February 2004) – strikes that now largely appear to be resolved.

Classic recession-resistant sectors drove payroll gains in October, which were strongest in health care & social assistance (+58,000 jobs added), government (+51,000), and social assistance (+19,000). There was also continued strength in construction (+23,000) despite some signals of a slowing housing market. Employment contracted in Information and in Manufacturing – both the focus of strike activity.

Payrolls were flat in retail, an unusually weak result for October when there is typically the first wave of holiday hiring. It’s possible that retailers are waiting longer to ramp up store staffing in anticipation of an easier seasonal hiring market than over the past few years.

Unemployment Rate Up

The unemployment rate ticked higher to 3.9 percent after two consecutive months holding at 3.8 percent. Though still lower than all but about 15 percent of the months going back to 1948, it is now 0.5 percentage points above its recent low of 3.4 percent in April 2023 – an important psychological threshold.

October’s increase in the unemployment rate in October was driven by permanent job losers – workers whose jobs were fully eliminated -- and by new labor force entrants (612,000), which hit its highest level since September 2019. The headline labor force participation rate was flat and the prime working age (25-54) participation rate edged lower by 0.2 percentage points to 83.3 percent, still well above where it stood pre-pandemic.

Wage Growth Slowing too Slowly

Wage growth fell to 4.1 percent in October from 4.2 percent in September and 4.3 percent in August. The path to slower, more sustainable wage gains across the economy has been frustratingly slow for policymakers concerned about long-term inflationary pressures. The downward trend should accelerate as we move into early 2024, with somewhat softer year-earlier comps.

Conclusion

It will be easy to look past the soft October payroll number as the transitory effect of now largely resolved strikes. But the downward revisions to the September and August data were the latest in a line of volatile revisions that have forced many market watchers to repeatedly revise their pulse on the jobs market.

A steady stream of labor market data that – in any other time – would be welcomed as a signal of an remarkably robust economy, somehow have been unable to shake slumping sentiment across employees, consumers, and investors. Repeatedly over the past year, major macro risks have eased only to give way to new risks: Some have passed (e.g., the banking crisis, strikes) while others remain unresolved (e.g., a possible government shutdown) and others appear to be escalating (the Middle East conflict). Despite the trying headlines, businesses continue to serve their customers, continue to hire, and continue to cautiously lay plans for the future.

More Insights

Payrolls grew by 150,000 in October. September's 336,000 job gains spike was revised down to 297,000.

Motor vehicle manufacturing jobs dropped by 33,200 due to the UAW strike. Now that the strike is over, those jobs should return in coming months. The drop in Information jobs of 9,000 may also reflect Hollywood strikes so some rebound there is also likely.

Growth in sectors that drove pandemic-era job gains like professional & business services, transportation & warehousing and information has slowed to below pre-pandemic levels. However, healthcare, education and government have picked up the slack, driving much of recent job gains at paces well above 2019 averages.

Average hourly earnings grew 4.1 percent year-over-year. Over the last 3 months, wage growth is only up 3.2 percent annualized.

Average weekly hours also ticked down to 34.3 hours per week. Taken together, cooling wage growth and hours dampen any inflationary effect of payroll growth.

Unemployment rose to 3.9 percent. The slow but continuing rise here is getting concerning, as a large enough rise in the unemployment rate is a traditionally strong indicator of recession.

The rise in October was driven in part by a bump in the number of unemployed on permanent layoff, though the share is still a bit lower than early 2023 when there was a wave of layoffs.

The prime-age employment-population ratio and labor force participation rate both fell in October. While they remain high by 2000s standards, there's still room to grow and we can only hope that the peak isn't behind us for these measures.

The unemployment rate rose across racial/ethnic groups in October. All groups have seen a rise over the course of 2023 (with varying degrees of volatility), consistent with the slow rise in the overall unemployment rate.