Weekly Economic Trends and Indicators

The Headlines:

Nonfarm payroll employment in the U.S. increased by 12,000 jobs in October, according to the latest report from the Bureau of Labor Statistics (BLS). This figure, which the report characterized as “essentially unchanged” from the previous month, was far below expectations. Job growth from the previous two months was also revised downward by a total of 112,000 compared to previous estimates. The national unemployment rate remained at 4.1%. The report also states that average hourly earnings increased by 0.4% during October, rising to $35.46. Over the last 12 months, average hourly earnings have increased by 4.0%.

Locally, the BLS reported that payroll employment in the Quad Cities metro area was 181,400 in September. This is down 1.3% from the previous September. The unemployment rate in the metro area was 5.4%, up from 4.9% in August.

The Details:

The report identified several sectors experiencing the most gains or losses in jobs nationally. The health care sector has been averaging 58,000 net new jobs per month and added another 52,000 in October. Government added 40,000 jobs (12-month average 43,000).

Manufacturing employment decreased by 46,000 in October, mostly due to strikes. Temporary help services decreased by 49,000 in October and has shed 577,000 jobs since March 2022.

Locally, manufacturing employed 24,300 in the Quad Cities metro area in October, which is down by about 2.0% over the last 12-months. While manufacturing employment here is down from its post-COVID peak of 25,700, it remains near the level of recent peaks in 2014 and 2018.

The Context:

There is some debate about the size of the impact of the Boeing strike and the recent hurricanes on the overall job numbers, but even after taking those events into consideration, it was still a rather dismal report. Thus, even though GDP growth was still positive in the third quarter and the overall economy is holding up reasonably well, it was widely expected that the Federal Open Market Committee would lower the fed funds target by 25 basis points as they did last week.

However, the 10-year Treasury yield has surged in the last couple of weeks amid renewed concerns over inflation as well as concerns over the deficit implications of the incoming presidential administration’s policy goals. As a result, the Fed may need to slow the pace of interest rate cuts. The CME FedWatch reports that the market’s probability assessment of a 25-basis point cut in December is now 58.7% (as of November 12) compared to 82.7% on November 1. Hardly a sure thing, but still fairly likely. However, the January probability has dropped even more sharply. All of this suggests that long-term interest rates, such as mortgage rates, could remain elevated for longer than expected. This is not necessarily bad news as it reflects underlying strength in certain parts of the economy, though it does prolong the suffering for rate-sensitive industries.

Next week: International trends