Private-Sector Jobs Went Negative in October. Will the Fed Panic Again?

According to the most recent report from the federal government’s Bureau of Labor Statistics, the US economy added only 12,000 payroll jobs during October. This was the smallest month-to-month employment gain in nearly four years. Moreover, total private jobs fell in October by 28,000.

This is the worst employment report since 2020, and it reflects an overall downward trend in employment growth since 2022. In addition to the drop in private employment, the report also shows drops in full-time employment and ongoing stagnation in the total number of employed workers. This is an economy in which whatever lackluster growth there is in employment, it’s being driven by part-time jobs and taxpayer-funded government workers.

Government Jobs vs. Private Employment

Total government jobs grew by 40,000 during October, meaning total job growth for the month would have been negative were it not for the immense amounts of deficit spending that props up growth in government hiring. This has been a growing trend over the past year. Proportionally, government jobs over the year have grown one-and-a-half times more than private-sector jobs.

For most of the past year, however, there were—at least according to the establishment survey— some gains in private employment. But that wasn’t the case in October meaning private employment fell in October for the first time in 46 months.

But, 12,000 more people had jobs in October than in September, right? Not quite. That number comes out of the so-called “establishment” survey which counts only jobs, but not employed workers. According to the federal government’s other employment survey—the household survey—the total number of employed workers in the United States fell in October, month over month, by 368,000 workers.

Over time, this has led to stagnation in total employment in the household-survey numbers. Over the past eighteen months, total employed workers has gone nowhere, and as of October, there are 370,000 fewer employed workers in the United States than there were eleven months ago:

Yet, over this period, total jobs in the establishment survey has grown by more than 2 million jobs. So why are there job gains in the establishment survey but job losses in the household survey? One probable explanation is that much of the job growth we see is driven by part-time jobs and by people holding more than one job to make ends meet.

Not surprisingly, the household survey does indeed show that full-time employment fell in October both month-to-month and year-over year. Part-time jobs, on the other hand, continued an upward trend in growth, year over year.

In fact, year-over-year full-time job growth has now been negative for nine months in a row, for the past thirty years, that has only happened when the economy is in recession:

There is other bad news in the report, as well. Temp jobs continue their long march downward, and total temp work is now at the lowest level reported in more than a decade. Year-over-year, temp work has been down for two full years. For more than thirty years, this has only happened during recessions.

Average weekly overtime hours remained at 3.6 hours in October. For more than 30 years, average overtime has been at this level only during recessions. The total number of permanent job losers also spiked in October, rising to the highest level reported—outside the covid crisis—in 90 months.

These jobs numbers weren’t the only bad news released today, either. The PMI manufacturing index, released by the Institute for Supply Management, fell to 46.5 percent. This was the lowest reading of the year, showing “economic activity in the manufacturing sector contracted in October for the seventh consecutive month.” The report showed new orders, production, and employment were all in contraction territory during October.

Will the Fed Panic Again? 

The question that now faces markets is this: what will the Federal Reserve do in response to the October job report? The bond markets may give us hint.

Today, after the release of the jobs report, the 10-year yield rose quickly to a four-month high. Overall, the yield curve steepened today as the 5-year, the 10-year and the 30-year also all experienced significantly rising yields.

This strongly suggests that bond investors expect the Fed, in the face of increasingly bad economic data, will totally throw in the towel on its alleged war against price inflation. With government debt levels at nosebleed levels, and now with this jobs report, there is every reason to believe that the Fed simply doesn’t have to stomach to do anything but lower the target policy rate in an effort to keep government debt cheap and to stimulate the job market.

That points to rising price inflation, and that points to rising yields in the longer term. Thus, we now see that rise in the 10-year and 30-year bonds.

The bond markets are probably right. At this point, it’s nearly a sure thing that the Fed will cut the target rate by at least 25 basis points as already expected. After all, at the September meeting, following a middling jobs report that was better than this one, the Fed panicked and chopped 50 basis points off the target rate. It may do so again.

This all points to a hard pivot toward more dovish policy and more price inflation moving forward. Of course, price inflation could fall in coming months. But that won’t be thanks to the Fed, it would be thanks to recession and a collapse in demand. On the other hand, given the immense amounts of monetary inflation that has occurred over the past four years, we could get both recession and ongoing inflation. Then we’ll get stagflation and Powell will go down in history as the worst Fed chairman since Arthur Burns. The bond markets seem to be entertaining the possibility.

 


Originally Posted at https://mises.org/


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    German Government Collapses As Mass Strikes Grind Economy To A Halt

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    It’s not a good day for the establishment. Just hours after Kamala Harris – and the Democrats – staggering loss which ushered in Trump as president for the third time and gave Republicans a sweep of Congress, Germany’s three-party ruling coalition which had been on the verge of collapse for months, imploded on Wednesday evening after Chancellor Olaf Scholz announced he will fire Finance Minister Christian Lindner over persistent rifts on spending and economic reforms, a move that paves the way for a snap election at the end of March.

    The firing ejects Lindner’s fiscally conservative Free Democratic Party  (FDP) from the troubled coalition, forcing Scholz to call for a confidence vote that he said would take place on January 15. If Scholz loses that vote, which is virtually certain, a snap election is set to take place by March.

    The collapse of Germany’s government came just hours after Donald Trump’s clear win in the U.S. election, a result that stunned German political leaders, who depend on American military might for their country’s defense and fear Trump’s tariff policies will hobble German industry.

    “Dear fellow citizens, I would have liked to have spared you this difficult decision, especially in times like these, when uncertainty is growing,” said Scholz – viewed as the weakest German chancellor in decades – in a statement at the chancellery.

    But the rifts inside the coalition proved too great to overcome. Caught in the middle of an impossible battle, Lindner and his conservative FDP insisted that the German government stick to strict spending rules and cut taxes, even as his left-wing coalition partners wanted to maintain social spending and boost German industry through economic stimulus.

    “All too often, Minister Lindner has blocked laws in an inappropriate manner,” said Scholz in a statement. “Too often he has engaged in petty party-political tactics. Too often he has broken my trust.”

    Scholz said he had offered Lindner a deal to create an emergency fund to aid Ukraine that would exist outside Germany’s regular budget, but Lindner refused to participate in such fiscal gimmicks that saw the UK recently redefine the nature of “debt.”

    “Olaf Scholz has long failed to recognize the need for a new economic awakening in our country,” said Lindner. “He has long played down the economic concerns of our citizens.”

    As Politico reports, the FDP is the smallest party in the coalition and is now polling at only four percent — below the threshold needed to make it into the German parliament — meaning its leaders have been mulling a coalition break in order to save their political futures.

    Crisis talks in the coalition of Scholz’s Social Democratic Party, the Greens and Lindner’s Free Democratic Party had come to a head after the FDP issued a paper with demands for liberal economic reforms that were difficult for the other two parties to accept.

    Lindner’s recent policy paper, leaked to the media last week, called for tax cuts and a scaling back of climate policies in order to stimulate economic growth — both positions that put the party at odds with his coalition partners.

    Central to the coalition disagreements was the adoption of the 2025 budget by parliament in which a gap of at least €2.4 billion, and potentially far more, needs to be filled, as well as an agreement on measures to revamp the country’s ailing economy.

    The government crisis comes at the worst possible time: Trump’s victory, which anticipates imposing significant tariffs on German exports, is expected to put heavy pressure on Europe’s largest economy. An analysis from the German Economic Institute (IW) estimates that a new trade war could cost Germany €180 billion over Trump’s four years in office.

    Many in Germany had hoped that the victory of Donald Trump in the U.S. election earlier in the day would force the coalition to hold together over fears that the incoming president would give Europe’s biggest economy a hard ride, targeting its all-important car industry in a trade war.

    Ultimately, however, not even the looming threat of Trump proved enough for the fractious parties to put aside their differences.

    Sensing that the economy is about to go from bad to much worse, last Tuesday – amid mounting concern about the imminent collapse of the EU’s largest manufacturing economy – Germany’s giant trade union IG Metall launched strikes in the nation’s metal and electrical industries in an attempt to win higher wages. According to the tabloid Bild, employees began walking off the job during the night shift, including at Volkswagen’s plant in the city of Osnabruck, where workers worry the plant may be closed.

    Elsewhere, around 200 employees of the battery manufacturer Clarios went on strike in Hanover, Lower Saxony, carrying torches and union flags, the outlet wrote.

    Meanwhile, in Hildesheim, Lower Saxony, around 400 employees, including those at Jensen GmbH, KSM Castings Group, Robert Bosch, Waggonbau Graaff and ZF CV Systems Hannover, have reportedly halted operations.

    Protests are also expected at BMW and Audi plants in Bavaria. Work is to be stopped nationwide during the course of the day, the tabloid wrote.

    ”The fact that production lines are now at a standstill and offices are empty is the responsibility of the employers,” IG Metall’s negotiator and district manager Thorsten Groger stated, as quoted by Deutsche Welle.

    IG Metall is demanding a 7% pay raise compared to the 3.6% raise over a period of 27 months offered by employers’ associations, due to soaring inflation. The companies call such demands unrealistic.

    The mass strikes come as Volkswagen announced on Monday it would close “at least” three of its ten plants in Germany, lay off tens of thousands of staff and downsize remaining plants in the country. The measures are part of a cost-cutting drive, the conglomerate said earlier. Oliver Blume, chief executive of the VW Group, has cited a “difficult economic environment” and “failing competitiveness of the German economy” as factors behind the decision.

    The German Association of the Automotive Industry warned last year that the country was “dramatically losing its international competitiveness” due to soaring energy costs.

    A recent survey by the VDA auto industry association suggested that the reshuffling of the German car industry could lead to 186,000 job losses by 2035, roughly a quarter of which have already occurred.

    Tyler Durden
    Wed, 11/06/2024 – 23:25

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