News: A scary jobs report

Friday, November 1, 2024

A scary jobs report

Nov 01, 2024

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QUICK FIX

Political coverage of the government’s monthly jobs report is dictated by the following rule: Strong increases in non-farm payrolls and wages favor the incumbent (i.e. Vice President Kamala Harris) and weak numbers favor the challenger (former President Donald Trump). Conversely, rising unemployment rates hurt Harris’s case that the economy is improving and help Trump’s argument that it’s, in his words, “a total disaster.”

This dictum should be ignored when the Labor Department releases its October report at 8:30 this morning.

Weekly claims for unemployment spiked early last month as two hurricanes caused tens of billions of dollars in damage to communities across the Southeast. The effects of Hurricane Milton and Hurricane Helene could trim as many as 50,000 positions from payrolls in October, according to Goldman Sachs analysts. Federal Reserve Gov. Christopher Waller said it could knock 100,000 positions off monthly growth totals. Either estimate represents a major haircut to the 200,000-plus jobs the economy gained on average each month over the preceding year.

In other words, the headline numbers in today’s jobs report could tell a negative, but very incomplete, story about the state of the labor market days before an election that’s been defined by how voters perceive the economy. New and continuing unemployment claims fell last week, a sign that certain affected regions are starting to rebound, and if the storms hampered the Labor Department’s survey of employers, we may see sizable revisions to the October report in the coming months.

A major reason why consumer confidence surged last month is because Americans are feeling more bullish about their ability to find jobs . And though the economic pessimism that defined the Biden era hasn’t gone away, it has faded as unemployment, inflation and growth began to normalize. (And there’s a non-zero chance we get a surprise on the upside. ADP, whose monthly data on private sector job growth, totaled 233,000 this month).

A dismal jobs report could blunt that momentum.

The Biden administration is already playing defense. One White House official warned reporters earlier this week that the hurricanes, along with last month’s labor disruptions, could make October a “a noisy report” but that they “don't anticipate that this will in any way affect” the labor market’s underlying resilience.

“Economists from across the political spectrum have been out there saying this report is going to be weird, and I don't think anyone who follows these numbers at all seriously is going to think twice about a low number,” said former Biden administration economist Martha Gimbel, now the executive director of the Budget Lab at Yale. “Obviously, there are people who are going to want to take a low number and spin it for their own political ends.”

Remember: The unexpectedly weak July report sent markets and political leaders into a tizzy. Labor market anxiety fed into a stock market sell-off that Trump dubbed the “Kamala crash” — though share prices quickly recovered — and Trump sought to capitalize again in August when the Labor Department revised down a year’s worth of jobs reports by 818,000 positions.

Those lines of attack faded after September’s blockbuster jobs report. The data released later today could provide Trump the opportunity to revive them in the final days of the campaign.

Key caveat: Voter perceptions of the economy and each candidate’s approach have likely already crystalized, one top Trump ally told MM. His “campaign might try to make something out of it, but [for] the newspapers and economists? It’ll be a hard sell,” they said.

HAPPY FRIDAY — Your host is off today to mentally and physically prepare for next week’s batch of newsletters. If you’ve got transition tips or last-minute insights into how Wall Street or the corporate world is preparing for Election Day, I’d love to hear them. Email me at ssutton@politico.com. And if you’re hearing anything on Basel III or the bank reg world, be sure to reach out to Michael Stratford at mstratford@politico.com.

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Driving the Day

Labor will release the jobs report for October at 8:30 a.m. … The ISM Manufacturing Index for October will be released at 10 a.m. …

Remarkable — The Commerce Department on Thursday reported that the Fed’s preferred inflation gauge dropped to 2.1 percent, barely above its 2 percent annual target. “While critics said we needed a recession to lower inflation, instead inflation has come down while our economy has grown more than 12 percent over the course of my Administration—the fastest rate of any presidential term in the 21st century,” President Joe Biden said in a statement.

There’s a detail — From the WSJ’s Rachel Louise Ensign profile of Cantor Fitzgerald CEO Howard Lutnick , the billionaire investment banking CEO who’s leading Trump’s transition team: “Lutnick works for his companies from 6:30 a.m. to 9 a.m. and 4 p.m. to 10:30 p.m. In between, he volunteers for the Trump transition team. He is in back-to-back meetings with potential candidates and the executives and politicians vouching for them.

“Recommendations come in from executives including Apollo Global Management head Marc Rowan and brokerage founder Charles Schwab . In the middle of a meeting with a Journal reporter, a senator called.”

Here come the hawks — The chair of the House Select Committee on the Chinese Communist Party John Moolenaar (R-Mich.) is introducing a bill to create a new Deputy Secretary for Economic Security, Ari Hawkins reports . If enacted, the new position would absorb the responsibilities of several offices focused on trade and economics, which would be eliminated.

Hmm… — CNBC’s Hakyung Kim reports: “Stocks slid on Thursday as Wall Street digested discouraging quarterly reports from megacap technology names and awaited further results.”

Reax — Republicans seized on prominent Harris campaign surrogate Mark Cuban’s claim that Trump is never “around strong, intelligent women ever,” Brittany Gibson reports. (ICYMI, read more from Victoria Guida on how Cuban’s emerged as one of the Harris campaign’s most important proxies).

“I’m told @mcuban needs help identifying the strong and intelligent women surrounding Pres. Trump. Well, here we are! I’ve been proud to lead this campaign,” senior Trump campaign adviser Susie Wiles wrote in a rare post on X in response.

At the regulators

CFPB probes Cap One: The Consumer Financial Protection Bureau is considering an enforcement action against Capital One over how it marketed and charged interest on savings accounts, the bank disclosed to investors on Thursday.

Capital One said the CFPB’s possible action centers on similar allegations made against the company in a class-action lawsuit. That complaint accuses Capital One of misleading existing “360 Savings” account customers into thinking they were earning a higher interest rate than they were by introducing a similarly-named “360 Performance Savings” account that paid a higher rate.

“This investigation relates to a previously reported class action lawsuit filed in 2023, for which we have filed a motion to dismiss in court,” a Capital One spokesperson told MM. The CFPB declined to comment.

The new scrutiny from the CFPB comes as Capital One is in the throes of a bid to get regulators to approve its proposed $35 billion acquisition of Discover. The deal – which is being examined by banking regulators, the DOJ and New York Attorney General – would create the nation’s largest credit card company and sixth-largest bank.

One more shot — JPMorgan Chase has agreed to pay $151 million to settle five separate actions that related to allegedly misleading disclosures, prohibited joint transactions and principal trades, among other alleged failures, Declan reports.

Another lawsuit — Nasdaq and Cboe Global Markets are challenging a new Securities and Exchange Commission rule that will allow stock exchanges to begin quoting shares at increments of a half-penny while lowering the so-called access fee cap that exchanges can charge, Declan reports.

A message from the American Bankers Association:

Fed File

Meanwhile, Jerome Powell is cueing up Cornell 5/8/77 — Steven Kelly, the Associate Director of Research at the Yale Program on Financial Stability, spotted a new paper in the National Bureau of Economic Research that found “most Republican-leaning consumers believe the Fed favors Democrats, whereas most Democrat-leaning consumers perceive the Fed as favoring Republicans.”

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On the Hill

Warren blasts DOJ over TD Bank case — Sen. Elizabeth Warren is accusing the Justice Department of going too easy on TD Bank in its plea deal over systemic money-laundering failures, Michael Stratford reports. As part of that deal, TD Bank agreed to pay a record $3 billion in penalties and face an asset cap that prevents the bank from growing larger.

But the Massachusetts Democrat said the agreement included “absurd legal gymnastics” that appeared designed to avoid stiffer punishment for TD Bank. DOJ, for example, allowed the bank to plead guilty to conspiracy to launder money rather than money laundering itself — a move that would have triggered a possible “death penalty” from the OCC. Warren also pressed DOJ on why it hasn’t charged high-level executives in connection with the case.

Jobs report

The FDIC named Amanda Lavis as director of the agency’s Office of Equal Employment Opportunity. The office, which was formed earlier this year in the wake of the bank regulator’s workplace harassment scandal, will accept employee discrimination and retaliation complaints. Lavis previously was the chief culture officer for the U.S. Army Combat Capabilities Development Command.

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