WASHINGTON (Reuters) – US job growth probably slowed sharply in October, weighed down by a strike by General Motors ( GM.N ), while unemployment is believed to be peaking near the 50-year low of 3, 5%.
FILE PHOTO: A "Help Wanted" sign reads "Not Hiring" in Livonia, Michigan, USA, October 9, 2019. REUTERS / Brian Snyder
40-day strike by members of United Auto Workers union, who came when hiring already declined, it could make it difficult to get a clear pulse in the labor market and clues to consumer health, the engine of the economy.
The Labor Department's closely followed monthly employment report on Friday will follow data this week showing a further slowdown in economic growth in the third quarter as a trade tide induced a decline in business investment.
The Federal Reserve cut interest rates on Wednesday for the third time this year, but signaled a break in the relief cycle that began in July when it reduced borrowing costs for the first time since 2008.
"There will be more noise than signal in this hiring report because of the GM strike, says Ryan Sweet, senior economist at Moody's Analytics in Westchester, Pennsylvania.
According to a Reuters survey of economists, non-farm levels probably rose by just 89,000 jobs in October, while the industry throws at least 50,000 jobs, which would be the most since 2009. Employment increased by 136,000 jobs in September.
Government data last Friday showed that 46,000 GM employees were inactive at carmakers' facilities in Michigan and Kentucky during the period the establishments were surveyed for pay for October.
Striking workers who do not receive pay cut during the pay survey period are treated as laborers The strike, which ended last Friday, had an impact on suppliers in the automotive industry. It led economists to believe that the work stoppage cut between 75,000 and 80,000 jobs from wage developments in October.
Even without the strikes, labor growth has slowed this year, averaging 161,000 per month, compared to an average monthly gain of 223,000 in 2018. The nearly 16-month US-China trade war, which has undermined business investment, has been blamed for the slow job growth.
"We do not want to ignore the impact of the trade struggle on business job decisions," said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings in New York.
THE ISLAND ON WAGES
The measure of the Institute of Supply Management (ISM) for industry has come together, suggesting that manufacturers can plan for labor reductions. ISM's employment meter for services has also gone down.
The GM strike is also seen as limiting the setback in wage gains in October. Average hourly wages are expected to rise 0.3% after remaining unchanged in September. That would raise the annual wage increase to 3.0% in October from 2.9% in September. Wage growth peaked at 3.4% in February.
There are fears that corporate investment mismanagement may spread to the labor market, supporting consumer spending. Fed leader Jerome Powell said he did not see this risk as the labor market is still solid, but not everyone is convinced.
"As it is, some contagion is already evident," said Bob Schwartz, a senior economist at Oxford Economics in New York. “Small companies report cuts in employment and investment plans. If this bad remark resonates in a meaningful way for households and results in an increase in job security, the last pillar that fell into a recession – consumer spending – would be in danger of crumbling. "
on the economy from weak business investment to limit the decline in growth to an annual rate of 1.9% in the third quarter. The economy grew by 2.0% in the April-June quarter.
Although the household survey as unemployment is derived from, probably treated by striking workers as employed, unemployment is expected to rise by one-tenth of a percentage point to 3.6% in October, the household survey, which is unstable due to a small sample, showed 1.57 million jobs was created over the past five months, far exceeding the payroll reported in the larger establishment survey.
“This discrepancy creates a certain risk of a sudden reversal in household sys employment, which can lead to a sudden rise in unemployment, which will be particularly disturbing at a time when markets are focused on recession or risk, says Michelle Girard, chief economist at NatWest Markets in Stamford, Connecticut.
October's expected strike-driven fall in production will follow a fall of 2,000 jobs in September, which was the first fall in factory wages in six months. Production is struggling under the weight of trade tariffs, which the White House has argued is intended to boost the sector.
Construction employment is expected to have increased in October, although employment has declined from a peak of 56,000 jobs in January. Further gains are expected in government employment, partly due to hiring for the census in 2020.
Reporting by Lucia Mutikani; Editing Dan Grebler