December 02, 2024
The October jobs report came in somewhat weaker than had generally been expected, with the establishments adding just 12,000 jobs. However, this weakness was explained in part by the strike against Boeing, which idled 33,000 workers directly, and a number of others in supplier industries. There were also two major hurricanes that hit Florida and the Southeast before the reference week, which also almost certainly had an impact on employment.
These effects will be largely reversed in November. The strike has ended, and Boeing workers are back on the job. While many businesses are still recovering from the hurricanes, there are many people employed in repair and renovation work, which will offset most if not all the lost jobs in businesses that are still not running normally.
One big source of uncertainty in the November data is the impact of Donald Trump’s plans for mass deportation. The reference week was after the election, so there may already be some effect showing up in the data. This will more likely affect total employment in both the household and establishment surveys than the unemployment rate, which should stay close to October’s 4.1 percent.
Immigration and the Jobs Numbers
It is likely that the October data already reflected the sharp decrease in immigration at the start of the summer. The data are highly erratic, and not seasonally adjusted, but the increase in the employment of foreign-born workers in the three months ending in October was just 89,000. That compares to 328,000 for the three months ending in October 2023, and 768,000 for October of 2022.
The outcome of the election likely has many undocumented workers concerned about deportation. According to accounts in the media, many workers have already left their jobs. It is also likely that even many staying in place will be less likely to answer government surveys.
Employers who have a large number of undocumented workers may also be less likely to answer the establishment survey. For these reasons, the November data on both the household and establishment side may look weaker due to the outcome of the election, although at this point it would be difficult to try to project the size of this effect.
It is worth remembering that the underlying rate of employment growth in the absence of the immigration surge was very slow. Before the pandemic, the Congressional Budget Office projected that we would be creating jobs at the rate of just 20,000 a month. If we are actually seeing migrant workers leaving, or at least not being counted by our surveys, then we would expect an even lower monthly number than if we just had a slowed rate of immigration.
Manufacturing to See Jump in Employment, Other Sectors Could Feel Migrant Effect
We are virtually certain to see a substantial jump in manufacturing employment due to the end of the Boeing strike. The loss of migrant workers will take a hit in some areas, like food processing, but this probably will not show up to any great extent in the November data.
Other sectors where an impact may slow job growth include construction and health care; however, both sectors are almost sure to show strong growth in November. Construction has shown consistent strength, driven largely by the boom in construction of factories. There will also likely be a lift due to rebuilding after the hurricanes.
Health care has consistently led employment growth, although the pace has slowed some in recent months. It will likely add somewhat less than its 58,000 average growth over the last year. State and local governments will likely add close to 30,000 jobs, in line with their growth rate over the last year. Restaurants added just 3,700 jobs in October, with growth likely slowed by the hurricane. We will probably see an increase of more than 20,000 in November.
Hours, Wages, and Productivity
Depending on the course of Trump’s deportation policies, we may see some unusual impacts on aggregate data. Most immediately, large-scale deportations can have a composition effect similar to what we saw with the pandemic shutdowns.
To take an extreme case, suppose that 10 percent of the workforce was removed (16 million workers) and that their pay was on average half that of the workforce as a whole. This would lead to an increase of roughly 5 percent in the average wage, even if no one’s wage had actually risen. Presumably, we will not see an impact of this magnitude, but it is worth noting the potential composition effect on wages.
The average hourly wage has been rising at roughly a 4.0 percent annual rate for most of 2024. This is somewhat faster than the pre-pandemic rate, but would still be consistent with the Fed’s 2.0 percent inflation target if productivity growth remains near 2.0 percent.
The index of aggregate hours was flat in October, while self-employment fell. It is still early in the quarter, but with GDP growth projected to be around 2.5 percent, it looks like we will get another good quarter of productivity growth. It is also important to remember that the profit share of income is still close to 2.0 percentage points above its pre-pandemic level. If workers are to get back their share of income we will need to see wage growth in excess of a sustainable non-inflationary rate for a limited period of time.
Unemployment Rate for Black Workers
The unemployment rate for Black workers was 5.7 percent in October, the same as its September level. This is down from a 6.3 percent rate early in the summer, but still nearly a full percentage point above the 4.8 percent all-time low hit in April of 2023. A further drop in Black unemployment would not only be good news for Black workers, but also indicate some tightening in the labor market when the migration picture confuses the aggregate measures.
Percent of Unemployment Due to Quits
Another data point worth watching is the percentage of unemployment due to voluntary quits. This fell to 11.5 percent in October. With an unemployment rate close to 4.0 percent, we would expect it to be close to 14.0 percent. This could mean workers are not optimistic about their job prospects and therefore don’t leave a job without another one lined up. Part of the story may also be that after record rates of job switching in 2021-2022, workers are happy with their current jobs. Also, the aging of the workforce slows down job changes. In any case, it is worth watching.
Positive Picture, with Some Questions
The Boeing strike, the hurricanes, and now the prospect of large-scale deportations make the headline jobs numbers difficult to read. Nonetheless, the overall labor market picture still looks mostly strong, albeit with some serious question marks.
