Employment Leading Indicator Steady in October, Labor Market May Stabilize
The Conference Board's Employment Trends Index for October shows that although nonfarm payrolls increased by only 12,000 in the month, future hiring indicators remained stable, hinting that the labor market may level off after recent cooling. Economists noted that the impacts of hurricanes and strikes are temporary, and with the Federal Reserve's rate cuts taking effect and election uncertainty fading, business uncertainty is expected to ease.
Key Takeaways
- The Conference Board's Employment Trends Index (ETI) showed that future hiring indicators for Octoberremained stable, suggesting the labor market may be stabilizing after recent cooling, despite weak employment growth that month.
- "Although the October employment report showed mixed results due to hurricanes and strikes, several labor market indicators in the ETI improved," said Mitchell Barnes, an economist at The Conference Board, in a statement.
- "The labor market continues to cool from its rapid post-pandemic expansion, but the ETI suggests this trend may be leveling off," Barnes said. "Currently, as Fed rate cuts begin to take effect and U.S. election uncertainty fades, we expect business uncertainty to start easing."
Deeper Dive
Data released by the U.S. Labor Department last Friday showed that U.S. employers added only12,000 nonfarm payroll jobs in October, far below expectations and just a fraction of the 223,000 jobs added in September.
The weakness in employment data is not entirely attributable to employers. Approximately33,000 Boeing workershave been on strike since September, and two hurricanes struck the southeastern U.S. in October and late September, temporarily displacing thousands of workers.
The Conference Board believes this setback in the labor market may be temporary. It released this assessment just hours before Boeing workers voted Monday to approve the company's proposed four-year contract. Workers agreed to return to their jobs on Wednesday.
"We expect some of the temporary volatility in the October data to reverse in the coming months, and overall, the U.S. economy will grow at a healthy pace in 2025 as inflation and wage pressures continue to ease," Barnes said.
In fact, Labor Department data showed the unemployment rate held steady at 4.1% in October. Additionally, as a positive sign for consumer spending, average hourly earnings rose 4% year-over-year in October, up from 3.9% in September.
"We expect the October labor market disruptions to be temporary and unlikely to materially affect the continued vitality of the U.S. real economy—which has grown more than 11% since the fourth quarter of 2019, far outpacing the post-pandemic recovery of other G7 members," Moody's Ratings said Monday.
This jobs growth data is the last major economic indicator reviewed by the Federal Reserve as it considers adjusting monetary policy. The Fed will begin its two-day policy meeting on Wednesday.
According to theCME FedWatch tool, interest rate futures traders see a 99% probability that policymakers will announce a 25-basis-point rate cut on Thursday. They expect a 75% probability of another 25-basis-point cut after the two-day meeting on December 18.
Currently, the Fed maintains its benchmark interest rate in a range of 4.75% to 5%.
The Conference Board said five of the eight components of the October ETI improved.
It noted that the share of involuntary part-time workers declined last month, while the proportion of respondents who said jobs were "hard to get" fell by the largest margin since January.
Moody's said U.S. employers added 421,000 jobs in the third quarter, down from 577,000 in the second quarter, adding that "we expect job growth to continue moderating as businesses with saturated labor demand slow hiring."