Jobs Market Stumbles Slightly, Market Prices in December Rate Cut

The October jobs report came in like a not-so-great earnings release. Some numbers up, some numbers down, and everyone’s a little more worried than they were before. Household employment rose by 174,000, but the labor force shrank by 193,000. If that math makes your head hurt, you’re not alone.

The labor force participation rate dipped to 62.5%, continuing its long trudge downwards. It’s the sort of number that makes you wonder whether labor market strength is just an optical illusion created by tight headcounts and overworked employees. Meanwhile, full-time workers fell by 111,000, part-time jobs dropped by 268,000, and unemployment for Black workers spiked to 6.4%, a 0.7 percentage point jump that underscores persistent inequalities in this “growing” economy.

Despite these wobbles, October’s payroll withholding data was surprisingly strong, though it might just be the taxman benefitting from inflated paychecks and not an uptick in actual jobs. Compensation growth has been running hot this year, outpacing productivity. That’s great for workers who are still employed but hints at creeping unit labor costs that could soon make bosses regret their newfound generosity.

And let’s not ignore the oddity of the unemployment insurance exhaustion rate, which is looking suspiciously like early-recovery levels. Combine that with slowing job growth over the summer, and it starts to feel like we’ve been riding out a recession that didn’t feel like a recession.

Meanwhile, Jerome Powell and the Fed are preaching patience on interest rates. That’s fine for them, but workers losing jobs or income might not find much comfort in waiting for inflation data to calm. Wall Street, on the other hand, is likely praying Powell stays in his zen state a little longer. For now, this labor market looks more fragile than the Fed would probably like to admit.