October jobs report adds to a U.S. economy full of uncertainty

Unfortunately for the Federal Reserve and voters looking for clarity ahead of next week’s presidential election, the October jobs report paints a murky picture of the nation’s economic status.

Data released Friday by the U.S. Bureau of Labor Statistics (BLS) shows that 12,000 nonfarm payroll jobs were added in October, essentially unchanged month over month. The average monthly job gain for the past 12 months is 194,000.

“This is the lowest monthly jobs number since employment fell in December 2020,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

In addition to October’s nearly nonexistent change in employment growth, the gains for August were revised downward from 159,000 to 78,000 jobs, while September’s numbers were revised down from 254,000 to 223,000 jobs.

With such little change in employment in October, it is no surprise that the unemployment rate was unchanged at 4.1% with 7 million people unemployed. A year ago, the jobless rate was 3.8% with 6.4 million people unemployed.

Although October’s job gains were modest, strong gains still occurred in the health care (+52,000 jobs) and government (+40,000) sectors. The most notable decrease came in the manufacturing sector, which lost 46,000 jobs during the month, which the BLS attributes, in part, to strike activity.

“Temporary shocks like Hurricanes Helene and Milton and the ongoing Boeing strike all likely distort the headline results, so it’s hard to know the ‘true’ rate of job creation in October,” Mark Fleming, chief economist at First American, said in a statement.

Mike Fratantoni, chief economist for the Mortgage Bankers Association, noted that while mass layoffs have not occurred, the pace of hiring has slowed in recent months.

“This continues a theme we have seen in recent months, where the labor market is not seeing large layoffs but instead an ongoing reduction in job openings and a reluctance by employers to add workers,” Fratantoni said.

Construction was another sector that posted gains in October, adding 8,000 jobs. Overall, the industry has added an average of 20,000 jobs per month over the past year.

Residential construction gained 1,300 jobs in October, while residential specialty trade contractors shed 6,600 jobs. The bulk of the sector’s gains came from nonresidential specialty trade construction, which added 14,300 jobs compared to September.

The real estate, rental and leasing sector also posted a small gain, adding 1,300 jobs in October, with 600 of these jobs specific to real estate.

Despite what economists say was an unexpected jobs report, they remain confident that the Federal Reserve will most likely cut interest rates further at its meeting next week, with Sturtevant forecasting a 25-basis point cut.

“There are some prospective home buyers and sellers who are watching the Fed to get a read on where mortgage rates might be headed,” Sturtevant said. “But mortgage rates are influenced by much more than what the Fed does. If economic conditions weaken and the labor market softens, mortgage rates could come down quickly. If this month’s Consumer Price Index report shows an uptick in inflation, mortgage rates could remain elevated.” 

Looking ahead to 2025, Fratantoni said the MBA is expecting the Fed to continue cutting rates, but he noted that mortgage rates are already largely reflecting the Fed’s predicted path.

While the Fed’s actions will certainly impact the housing market, Sturtevant believes what happens in the weeks following the election will be even more important.

“Uncertainty and anxiety could be a bigger incumbrance to housing market activity than higher unemployment, higher inflation or higher mortgage rates,” she said.