Democrats face jobs report blow ahead of election

Economists are anticipating what they say could be one of the worst jobs reports of Joe Biden’s presidency this Friday, just four days before the US presidential election.

Two deadly hurricanes and the Boeing strike will push down the headline figure for October payrolls, analysts say, temporarily obscuring the US labour market’s underlying health and denting its impressive recovery from the Covid-19 pandemic.

The median estimate in forecasts aggregated by Bloomberg for the non-farm payrolls report is a figure of 110,000 job gains, fewer than half of September’s increase and one the lowest totals since 2020.

The range of expectations is unusually wide for this most closely watched barometer of the US labour market, ranging from a 10,000 decline in payrolls to a gain of 180,000 for the month.

But the figure may not be welcome news for Democratic nominee Kamala Harris, who has struggled to defend her economic credentials, despite the administration’s record in overseeing a historically strong labour market.

“Everyone wants to come to some grand conclusion about the economy before the election, and it’s just the worst possible report for that,” said Martha Gimbel, who now leads the Yale Budget Lab after serving as a senior adviser on Biden’s Council of Economic Advisers. “The labour market is incredibly healthy.”

The worst inflation crisis in decades has already overshadowed the administration’s record of 16mn new jobs. After jumping to nearly 15 per cent in 2020, the jobless rate is now 4.1 per cent — close to historical lows.

Only on one occasion during Biden’s tenure — in April, when there were 108,000 job gains — has the monthly figure been below this Friday’s consensus estimate of 110,000.

Yet voters trust Republican nominee Donald Trump more than Harris to manage the economy, according to the final monthly poll for the Financial Times and the University of Michigan Ross School of Business. 

The non-farms data also marks the last significant economic data release before the US Federal Reserve makes its next decision on interest rates on November 7.

Officials are likely to look through the noisy October number — barring an unexpectedly huge negative shock — and proceed with a quarter-point cut next Thursday, a less aggressive move than the half point loosening made in September.

Raghuram Rajan, a former governor of the Reserve Bank of India, said he expected few specifics from Jay Powell during the Fed chair’s post-meeting press conference on what comes after next week’s decision.

Not only was there volatility in the data, but also the possibility of a drastic shift in economic policy if Trump wins the White House, he said.

“There are simply too many uncertainties,” said Rajan, now at the University of Chicago’s Booth School of Business.

The total economic damage caused by September’s Hurricane Helene — the deadliest to hit the US mainland since Katrina in 2005 — and Hurricane Milton two weeks later will take time to fully tally up. But their effects have already begun to crop up in the data.

So too has the impact of 33,000 Boeing workers walking off the job in September in a bid to improve pay and benefits.

For Friday’s jobs report, the Bureau of Labor Statistics surveyed businesses and households for the week ending October 12.

A negative number would be “disturbing”, said Vincent Reinhart, a former Fed official who is now chief economist at Dreyfus and Mellon, even as he said the US central bank had “a lot of leeway to dismiss the data”. Reinhart added there was a “high hurdle” for the Fed to not follow through on another quarter-point cut in December, as projections the central bank released in September indicated.

Christopher Waller, a Fed governor, acknowledged this month that October’s jobs data “won’t be easy to interpret”. Waller’s best guess was that the storms and strikes could deliver a “temporary” blow, by reducing the month’s payrolls total by 100,000.

Seth Carpenter, chief global economist at Morgan Stanley who spent 15 years at the Fed, thinks the headline jobs figure will come in at about 75,000 — half the size it would have been without the severe weather and Boeing strike.  

David Mericle, chief US economist at Goldman Sachs, believes the strikes will have an impact on 41,000 jobs, with the storms impacting up to 50,000. Once those temporary losses are added back to the 95,000 jobs he expects for the month, he said the “underlying trend is a respectable number”.

While Mericle does expect the labour market to cool further over time, he is not worried about a “steady trend up” in unemployment.

In a sign the impact of the storm will prove fleeting, jobless claims, which track the number of Americans filing for unemployment insurance, are already beginning to decline — including in the states worst affected by the severe weather. Nationally, they are close to pre-hurricane levels.

Beyond the jobs report, data shows the US economy remains in good shape.

The Conference Board’s consumer confidence index this month hit its highest level since March 2021.

Despite an extensive effort by the Fed to chill demand, consumer spending remains strong — helping growth hit an annualised 2.8 per cent in the third quarter.

“It’s hard to see how you’re in a slump when you’ve got that kind of consumer spending going on,” said Carpenter.

Data visualisation by Alex Irwin-Hunt in London and Eva Xiao in New York