With the October jobs report already expected to be a big drop from September's 336K, as consensus expected a 180K print (below the whisper number of 211K), moments ago the BLS confirmed that last month's surge was nothing but a Bidenomics mirage and as we warned in our preview, the October print indeed came "crashing down to earth", sliding to 150K, a drop of more than 50% from the original Sept print, and the second lowest since 2022!
As usual, historical data was revised massively lower, with the jobs change for August 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. In total, 8 of the past 8 months have been revised sharply lower in what only idiots can not see is clearly mandated political propaganda designed to make the economy look stronger at first glance then quietly revise the growth away.
Of course, the downward revisions are nowhere near done: as Pantheon Macro writes, "the jobs number likely will be revised down, continuing the pattern of downward revisions" as "the unemployment rate is on course to breach the 4.0% mark soon" tripping the recession redline.
The scariest number however did not come from the Establishment survey at all, but rather from the Household survey, where the number of employed workers plunged by 348K, the biggest drop since the covid lockdowns, This means that the US is already in recession.
To get a sense of just how manipulate the Establishment survey is, look no further than the divergence with the Household survey. It is safe to say that never in US history have payroll numbers been manipulated more.
And as employed workers plunged by 348K, the number of unemployed workers surged by 146K: an indication of which was the true labor market is headed.
It wasn't just payrolls that disappointed: so did the unemployment rate, which rose to 3.9% from 3.8%, vs expectations of an unchanged print. Since recent lows in April, this measure is up by 0.5% points, effectively cementing the next recession per Sahm's rule. Broken down by race, white unemployment was the highest since Nov 2021, black unemployment was the highest since Jul 2023, and Hispanic unemployment was the highest since Aug 2023. So much for white supremacy and privilege.
Meanwhile, the underemployment rate, or U-6, climbed to 7.2%, the highest since February 2022. This is a broader measure of unemployment that tracks the unemployed, as well as those marginally attached to the labor force and part-time for economic reasons.
Turning to wages we find more proof that the labor market bubble has burst, with wage growth in October just 0.2%, down from the upward revised 0.3% in Sept and below the 0.3% estimate. And on an annual basis, wage growth came in at 4.1%, below last month's 4.3% (revised from 4.2%)
Some more detailed from the report:
- 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.
A closer look at the what jobs were added (before they are revised sharply lower next month of course):
- 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.
- 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.
Bottom line: of the 150K jobs "created" in October, 51K were government jobs and 89K were education and health services. Even the restaurant revolution is over, with 7.5K waiters and bartenders losing their jobs in October.
As for that 35K drop in manufacturing jobs, well... stick a fork in that manufacturing renaissance we have been hearing so much about.
But wait, there's more: according to the birth/death model which added a whopping 412K non-existent but spreadsheet modeled jobs, the second highest on record! In other words, with the US economy sliding into recession the BLS is modeling the 2nd fastest pace of new business creation in history!
Bottom line: this was a catastrophic jobs report (and we haven't even dug deeper): as Bloomberg notes, the 52% of private industries who added jobs last month was the lowest since April 2020, at the height of the pandemic.
As for markets this was the best possible print: it means the Fed is done hiking and if anything will soon be cutting rates, or as Capital Economics puts it:
“The strongest argument for the Fed to abandon its tightening bias is that wage growth continues to slow with average hourly earnings rising by a muted 0.2% month on month and the annual growth rate falling to 4.1% -- the lowest since mid-2021. The decline in the job quits rate continues to suggest it will drop below 4% soon. Overall, we suspect the softening in labor-market conditions has much further to run and still expect the Fed to be cutting interest rates again in the first half of next year.”
And here is Bloomberg's Enda Curren: "Today’s numbers can be sliced and diced in any direction, but at the very least they won’t light any fires for a Fed rate hike in December. They support a soft landing -- for now."