The U.S. labor market is showing the effects of multiple hits causing the economy to lose steam. We have the unaffordability of higher borrowing costs following the Federal Reserve’s rate hiking spree, persistent inflation and war theatres in the Middle East and Ukraine. The report could lead Fed officials to extend their hiking pause. U.S. employers added 150,000 workers in October, lower than the expected 175,000 consensus following a downwardly revised 297,000 advance in September. The UAW strikes removed about 33,000 from payrolls in the month.
The participation rate moved down to 62.7% and the unemployment rate increased to 3.9%, the highest since January 2022. The higher unemployment means joblessness is close to triggering the Sahm Rule, which has proven to be reliable predictor of recessions in the past.
The rule by former Federal Reserve economist Claudia Sahm posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months. The low was 3.4% and October was the highest in 2023 so far, following two readings at 3.8% in August and September. A rate above the 3.9% level that would trigger the Sahm Rule.
The report was in tune with the ADP Employment Report for October which showed private payrolls increased 113,000 last month after posting the weakest advance in two years in September. The median estimate in a Bloomberg survey of economists expected 150,000. The report is released a day ahead of the BLS employment report.
Wage gains exceed both their pre-pandemic pace and what Fed officials would likely see, 3.5% annual wage growth consistent with inflation near their 2% target, assuming that worker productivity grows modestly. The ADP data showed further cooling in wage growth. Workers who stayed in their job saw a 5.7% median pay increase in October from a year ago, according to Wednesday’s report. For those who changed jobs, wages rose 8.4%. Both were the slowest pace since 2021.
October 2023 US Employment Report
October 2023 US Employment Report and Expectations
The jobless rate was 3.9% in October the Labor Department reported Friday. The unemployment rate is higher than the pre-pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high.
Highlights
Employment
- Change In Nonfarm Payrolls Oct: 150K (exp 180K; R prev 297K)
- Unemployment Rate Oct: 3.9% (exp 3.8%; prev 3.8%)
- Labour Force Participation Rate Oct: 62.7% (est 62.8%; prev 62.8%)
- Prior two-month net revision Oct: -101K vs +119K prior
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The employment Rate in the United States decreased to 60.20 percent in October from 60.40 percent in September of 2023. Employment Rate in the United States averaged 59.24 percent from 1948 until 2023, reaching an all-time high of 64.70 percent in April of 2000 and a record low of 51.30 percent in April of 2020.
The number of employed persons in The United States decreased to 161,222,000 in October of 2023 from 161,570,000 in September of 2023.
- Change In Private Payrolls Oct: +99K vs +158K expected
- Change In Manufacturing Payrolls Oct: -35K vs -10K expected
- Household survey Oct: -348K vs +86K prior
- Underemployment Rate U6 Oct: 7.2% (prev 7.0%)
- Birth-death adjustment Oct: +412K vs -119K prior
- Long-term unemployed June: mil vs (prev 1.1m, 1.2m pre-pandemic)
- In October, the number of long-term unemployed (those jobless for 27 weeks or more) little changed at 1.3 million.
- The long-term unemployed accounted for 19.8 percent of all unemployed persons.
Revisions Concern
Astonishingly all single monthly payrolls print in 2023 had been revised lower until August. June was revised down by 80,000, from +185,000 to +105,000, the original 209K has been revised 50% lower to 105K and from original expectations of 230K. BLS said “with these revisions, employment in June and July combined is 110,000 lower than previously reported.”
Earnings
- Average Hourly Earnings (M/M) Oct: 0.2% (exp 0.3%; R prev 0.3%)
- Average Hourly Earnings (Y/Y) Oct: 4.1% (exp 4.0%; R prev 4.3%)
- Average Weekly Hours All Employees Sep: 34.4 (est 34.4; prev 34.4)
- Payrolls benchmark NSA revision for 2022 was in Jan 23
- Payroll benchmark SA 2022 was in Jan 23
Other Employment Reports for October
- ADP report +113K vs +150K expected and +89K prior
- ISM services employment not yet released (it’s out 90 mins after NFP)
- ISM manufacturing employment 46.8 vs 50.6 prior
- Challenger Job Cuts -8.8% y/y vs +58.2% prior
- Philly employment +4.0 vs -5.7 prior
- Empire employment +3.1 vs -2.7prior
- Initial jobless claims survey week 200K vs 202K last month (was the lowest since Sept)
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
The labor force participation rate in the United States was unchanged at 62.8 percent in September 2023, the highest since February 2020, when the pandemic started to hit.
Market Reaction (Updated at Stock market open)
- Dow 34051.30 +212.22 (0.63%)
- Nasdaq 13436.14 +141.96 (1.07%)
- SP 500 4356.28 +38.50 (0.89%)
- 10-yr Note +33/32 4.521
- NYSE Adv 2372 Dec 442 Vol 275 mln
- Nasdaq Adv 3324 Dec 793 Vol 2.0 bln
- Market breadth shows a strong positive bias driving today’s price action. Advancers lead decliners by a greater than 5-to-1 margin at the NYSE and a 4-to-1 margin at the Nasdaq.
- Ten of the 11 S&P 500 sectors remain in positive territory. The real estate sector (+3.1%) is the top performer by a wide margin, reacting to the drop in long term rates.
Treasury yields surged higher in response.
- Treasuries rallied in immediate reaction to the report.
- The 10-yr note yield, which was at 4.63% just before 8:30 ET, is down 18 basis points from yesterday to 4.49%. 10-yr yield past its 50-day moving average (4.557%) to a level not seen in more than three weeks with the October low (4.532%) looming just below.
- The 2-yr note yield, which was at 4.97% before the data, is down 13 basis points from yesterday at 4.85%. 2-yr note continuing its recent outperformance as its yield reaches a level not seen since the end of August.
- 2-yr: -12 bps to 4.86%
- 3-yr: -13 bps to 4.64%
- 5-yr: -13 bps to 4.51%
- 10-yr: -13 bps to 4.54%
- 30-yr: -11 bps to 4.71%
WSJ Fed Watcher Nick Timiraos on the jobs report:
Where the Jobs Were:
Largest gains (prior month) occurring in:
- Health care (58K), namely ambulatory health care services (32K) and hospitals (18K);
- Government (51K), which has returned to its pre-pandemic February 2020 level;
- Construction (23K); social assistance (19K);
- Leisure and hospitality (19K);
- Professional and business services (15K).
Largest losses (prior month) occurring in:
- Employment in manufacturing declined by 35K, way more than forecasts of a 10K fall, reflecting a 33K drop in motor vehicles and parts that was largely due to UAW strike activity.
Household Survey Data
Both the unemployment rate, at 3.9 percent, and the number of unemployed persons, at 6.5 million,
changed little in October. However, since their recent lows in April, these measures are up by 0.5 percentage point and 849,000, respectively.
Among the major worker groups, the unemployment rates for adult men (3.7 percent), adult women
(3.3 percent), teenagers (13.2 percent), Whites (3.5 percent), Blacks (5.8 percent), Asians (3.1 percent),
and Hispanics (4.8 percent) showed little change in October.
Among the unemployed, the number of permanent job losers increased by 164,000 over the month to
1.6 million. The number of persons on temporary layoff changed little at 873,000.
In October, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.3 million. The long-term unemployed accounted for 19.8 percent of all unemployed persons.
Both the labor force participation rate, at 62.7 percent, and the employment-population ratio, at 60.2
percent, changed little in October.
The number of persons employed part time for economic reasons, at 4.3 million, changed little in
October. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
In October, the number of persons not in the labor force who currently want a job was 5.4 million,
little different from the prior month. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to
the labor force changed little at 1.4 million in October. These individuals wanted and were available for
work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4
weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached
who believed that no jobs were available for them, also changed little over the month at 416,000.
Establishment Survey Data
Total nonfarm payroll employment increased by 150,000 in October, below the average monthly gain
of 258,000 over the prior 12 months. In October, job gains occurred in health care, government, and
social assistance. Employment in manufacturing declined due to strike activity.
Private Jobs
- Health care added 58,000 jobs in October, in line with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+32,000), hospitals (+18,000), and nursing and residential care facilities (+8,000).
- Employment in government increased by 51,000 in October and has returned to its pre-pandemic February 2020 level. Monthly job growth in government had averaged 50,000 in the prior 12 months. In October, employment continued to trend up in local government (+38,000).
- Social assistance added 19,000 jobs in October, compared with the average monthly gain of 23,000 over the prior 12 months. Over the month, employment continued to trend up in individual and family services (+14,000).
- In October, construction employment continued to trend up (+23,000), about in line with the average monthly gain of 18,000 over the prior 12 months. Employment continued to trend up over the month in specialty trade contractors (+14,000) and construction of buildings (+6,000).
- Employment in manufacturing decreased by 35,000 in October, reflecting a decline of 33,000 in motor vehicles and parts that was largely due to strike activity.
- In October, employment in leisure and hospitality changed little (+19,000). The industry had added an average of 52,000 jobs per month over the prior 12 months.
- Employment in professional and business services was little changed in October (+15,000) and has shown little net change since May. Employment in temporary help services changed little over the month (+7,000) but is 229,000 below its peak in March 2022.
- In October, employment in transportation and warehousing was little changed (-12,000) and has shown little net change over the year. Over the month, warehousing and storage lost 11,000 jobs, while air transportation added 4,000 jobs.
- Information employment changed little in October (-9,000). Employment in motion picture and sound recording continued to trend down (-5,000); the industry has lost 44,000 jobs since May, at least partially reflecting the impact of an ongoing labor dispute.
- Over the month, employment showed little change in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; financial activities; and other services.
Government Jobs
Government Payrolls in the United States rose by 51K in October 2023, above market forecasts of a 29K reading, and following a downwardly revised 51K increase in the previous month. Employment in government has now returned to its pre-pandemic February 2020 level.
Manufacturing Jobs
Manufacturing Payrolls in the United States decreased by 35K in October 2023, above market consensus of a 10K drop, and following a downwardly revised 14K rise in the previous month. It was the biggest decline since April 2021 reflecting a loss of 33K payrolls in motor vehicles and parts mainly due to strikes in several automakers.
Earnings
In October, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents, or
0.2 percent, to $34.00. Over the past 12 months, average hourly earnings have increased by 4.1 percent.
In October, average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents, or 0.3 percent, to $29.19.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.3 hours in October. In manufacturing, the average workweek was little changed at 40.0 hours, and
overtime edged down by 0.1 hour to 2.9 hours. The average workweek for production and
nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.7 hours
Hours
The change in total nonfarm payroll employment for August was revised down by 62,000, from
+227,000 to +165,000, and the change for September was revised down by 39,000, from +336,000 to
+297,000. With these revisions, employment in August and September combined is 101,000 lower than
previously reported. (Monthly revisions result from additional reports received from businesses and
government agencies since the last published estimates and from the recalculation of seasonal factors.)
The Employment Situation for November is scheduled to be released on Friday, December 8, 2023, at 8:30 a.m. (ET).
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk