New Jobs Report Is 'Messy.' Will Voters — or the Fed — Care?

Between back-to-back hurricanes and tens of thousands of Boeing workers on strike, economists had low expectations for the October jobs report released Friday. The data failed to meet even those diminished expectations by a wide margin, showing that the U.S. added just 12,000 jobs for the month instead of the 100,000 expected.

“It was a messy report,” says Tom Hainlin, national investment strategist at U.S. Bank Asset Management Group.

Downward revisions to the past two months’ worth of data shaved another 112,000 jobs off recent gains. This is the smallest monthly job increase since December 2020, when the nation was still in the throes of the pandemic.

While the nation is in a far more stable place than it was at that time, the timing of this jobs report — coming only a few days before both a pivotal presidential election as well as a Federal Reserve meeting expected to deliver some interest-rate relief — would suggest outsized importance.

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By and large, though, analysts say the report is more indicative of disturbances in the data than dire economic straits. It offers confirmation that the economy is decelerating at a pace that is likely to satisfy policymakers.

“This wasn't weak enough that the Fed should become meaningfully more aggressive,” says Michael Green, chief strategist and portfolio manager at Simplify Asset Management.

The October jobs report certainly wasn’t all bad news. The unemployment rate remained at 4.1%, lower than the 4.3% economists predicted, and wage growth was solid, at 4% on a yearly basis.

In a statement, EY senior economist Lydia Boussour characterized the cooling labor market as undergoing a "gentle descent." The unemployment rate, she added, is "consistent with a resilient but slowing labor market."

People who are employed and are confident in their job security will likely continue to spend, Hainlin says. Solid consumer spending contributed to an annualized 2.8% rate of GDP growth in the third quarter, the U.S. Commerce Department announced Wednesday.

An interest-rate cut of a quarter percentage point is all but assured at the meeting of the Fed's rate-setting committee next week. Friday’s jobs report advanced the expectation that policymakers will also cut in December. Because lower interest rates generally make borrowing money less expensive, this is a positive development for people planning a big-ticket purchase like a home or a car. It should also offer some relief at the margin to people with variable-rate credit card debt.

But in a protracted, polarized election season, the smaller-than-expected number of new jobs in October is likely to become fodder in the final days of the campaign. With the presidential election candidates in a virtual dead heat, economic anxiety has the potential to be a determining factor in the race.

"The state of the economy is one of the most important topics for swing-state voters," Steve Rick, chief economist at TruStage, said in a statement.

The 12,000 jobs added in October were bolstered by 40,000 new government jobs, which suggests that businesses are cutting back on hiring or shrinking their payrolls. “The private sector is down 1.5 million jobs over the past year,” Green says — a slowdown that likely contributes to the sense among many Americans that they are on the ropes financially.

The U.S. is an increasingly economically divided nation, he says, with a lack of available jobs and higher borrowing costs disproportionately affecting some segments of the population. Recent increases in credit card and car loan delinquencies reflect that erosion of economic stability, even as other Americans continue to reap the benefits of locked-in low-rate mortgages and asset appreciation.

“You’re effectively moving into a haves and have-nots type of environment,” he says.

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