Just days ahead of the highly anticipated US presidential election and the Federal Reserve’s policy meeting, the government has reported a significant weakening in the labor market for last month. However, it remains unclear to what extent the recent storms in the Southeast affected the data.
Disappointing Job Numbers
The Nonfarm Payrolls report revealed that the US added only 12,000 jobs in October, falling far short of economist forecasts, which anticipated a gain of 113,000. This dismal figure is a stark contrast to September’s job growth of 254,000, which has been revised downward to 223,000.
Unemployment Rate Remains Steady
The unemployment rate for October stood at 4.1%, matching the expected and previous month’s figures of 4.1%. This relative stability in the unemployment rate may offer some solace, but it does not mask the overall weakness in the labor market.
August’s Job Gains Revised Lower
In addition to the downward revision for September’s job growth, August’s originally reported job gain of 159,000 has been revised lower to 78,000. This downward revision further underscores the weakening trend in the labor market.
Bitcoin Price Volatility
The release of this employment data, coupled with the reduced chances of a victory next Tuesday for crypto-friendly Donald Trump, has led to increased volatility in the price of bitcoin (BTC). Despite fluctuations, the price remains in the $70,000 area in the minutes following the report. Bitcoin had earlier rallied strongly but was turned back from a new record high above $73,700 on both Tuesday and Wednesday.
Bureau of Labor Statistics Notes
The Bureau of Labor Statistics has added a note to the report stating that it is not possible to quantify the effect of the recent storms on the payroll data. This acknowledgment highlights the challenges in accurately measuring the impact of external factors on economic indicators.
Market Reaction
Prior to Friday morning’s data release, market participants were overwhelmingly expecting the Fed to trim its benchmark fed funds rate by another 25 basis points at its policy meeting next week. However, with this disappointing employment report, it remains to be seen whether the Fed will adjust its stance.
Other Report Details
A closer examination of other report details reveals a bit more strength than the headline print. Average hourly earnings grew 0.4% in October, surpassing estimates for 0.3% and matching last month’s figure of 0.3%. Average weekly hours also showed resilience, with 34.3 hours being stronger than the expected 34.2 hours and flat from the previous month.
Traditional Markets React
In traditional markets, US stock index futures continue to hold modest gains following the data release. The 10-year Treasury yield has dipped four basis points to 4.25%, while the U.S. dollar has edged down 0.1%. The price of gold remains near a record high at $2,767 per ounce.
Conclusion
The marked weakening in the labor market ahead of the US presidential election and Federal Reserve policy meeting is a cause for concern. While it remains unclear how much the recent storms have affected the data, one thing is certain: the economy is showing signs of slowing down. As market participants await the Fed’s decision on interest rates, they will be closely watching the developments in the labor market and their impact on economic indicators.
