NEWS AND INSIGHTS | INSIGHTS
CIO Notebook: Shock Infested Data Shows October Payrolls Slowing
November 01, 2024
October data’s at large will be difficult to overweight in terms of decision making and we expect investors to look ahead to next week’s election and Federal Reserve (Fed) meeting as arbiters of market movements through the end of 2024
Ahead of a next Tuesday’s tightly contested U.S. Presidential election, October’s non-farm payrolls release came in well below already muted expectations at only +12k versus a consensus figure of +100k and a whisper number north of +130k. The paltry print was driven by gains in health care, government, and construction of +52k, +40k, and +8k, respectively, while sharp declines in temporary help in business services and manufacturing weighed on the final print. August and September payrolls were revised down as well by -112k with the bulk of that coming off the already middling August print. Caveats to the low level of payrolls are numerous and include a very low response rate at under 50% (the lowest in almost 50 years); the Boeing strike, which accounted for -44k lost payrolls in the manufacturing sector; and the impact of the one-two gut punch of Hurricanes Helene and Milton with an estimated 512k people not at work due to weather.
Shifting to the household survey, however, there is clearer evidence of a foundational slowing in the labor market from September’s blistering print. While September’s report boasted an increase of +430k in employed persons, that figure declined by -368k in October, while the number of unemployed persons rose by +150k. In addition, while the unemployment rate held steady (barely) at 4.1%, the participation rate fell to 62.6% -- a worrying sign for a Fed keenly focused on delivering its maximum employment mandate as evidence of a delivered soft landing.
Average hours worked remained consistent with September’s release at 34.3 hours. Wages, once again, were stronger than expected, up +0.4% month-over-month and +4.0% year-over-year. Continued gains in wages, even with moderation in payrolls, is likely helping to drive the resiliency of consumer spending. This resiliency was evident once again in the third quarter GDP print which showed the U.S. economy grew by +2.8%, highly attributable to consumer spending which grew by +2.7% year-over-year.
Today’s payrolls report comes on the back of several weeks of supportive economic data releases which have put the thought of a Fed pause in the minds of investors. The rapidity of the sentiment shift from early August, at which time investors were factoring in the potential for well over 100 basis points of interest rate cuts, to a potential pause in November or December has created meaningful volatility in the fixed income markets. Questions around moderating growth and outsized capital expenditure dampened enthusiasm for certain large cap technology stocks this week. Given the concentrated nature of the S&P 500 Index, equity returns coming into today’s release were lower despite overall solid earnings report across broad industries.
In short, while we acknowledge the importance of today’s print as the Fed moves closer to its November meeting, we believe that October data at large will be difficult to overweight in terms of decision making due to the exogenous impacts cited above. As such, we believe that investors will continue to look ahead to next week’s election and Fed meeting as arbiters of market movements through the end of 2024.
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