An optimistic October jobs report

Is it just me, or did five days in this economy have enough news to feel more like six? From American Public Media, this is Marketplace. In New York, I'm Kristen Schwab, in for Kai Risdahl. It's Friday, November 6th, and it's great to be here with you. Like I said, what a week. The October jobs report, obviously the midterm elections. So let's jump right into it. Catherine Rampell is the economics editor at The Bulwark. Heather Long is chief economist at Navy Federal Credit Union. Hello, you two. Hi, Kristen. Hi. So I want to start with the jobs report today. The numbers go the U.S. added 165,000 jobs in October, which lowered the unemployment rate a tad, 4.1%. unemployment rate a tad, 4.1%. Heather, the headlines this morning were all about kind of shock and surprise. I'm wondering what your read is. I was pretty surprised too. It was a blowout jobs report, strong on almost every category. And the reality is there's always a little bit of a whisper number on Wall Street. And I was definitely one of many people who thought this had a chance of being a little bit stronger than the 65,000 or so jobs anticipated. But come on, we got a number that was almost three times as high as what was anticipated. You had almost 400,000 people who started looking for jobs in October, many of whom got them, and stronger than expected wage growth. And the real surprise, which I don't think anybody saw coming, was having this big surge in white-collar jobs, you know, these professional and business service jobs. And sure, some of it's temporary help, but some of it is AI creating this need for consultants in technology and scientific space to come and help figure out how to implement AI. And, you know, that was a pretty big surprise. Yeah, well, Catherine, you know, one thing I have been wondering about with the jobs report is, it's been a month and a half since the Fed raised rates, and it seems like that hasn't shown up in the labor market yet. Will it show up? When? How? Well, what's the line? That rate changes always have long and variable lags. Monetary policy has long and variable lags. So who knows at this point? But it does seem pretty soon for that to be working its way through the economy. And I would be very curious to know how Fed officials are interpreting the numbers that we saw today, these gangbusters numbers that we saw today. And if they read it as, you know what, we've been raising rates, we're, you know, it seems like we're stepping on the brakes and the labor market is just not responding to that. So, you know, it's soon for us to see the implications. But that said, like, if you look at, you know, the long term rates, they're pretty high at this point. So it seems like markets have been somewhat forward looking. And so we have seen some tightening in financial conditions that, you know, it's just like the market is resistant to that, whether because of all of the AI build out being resistant to high interest rates or anything else. Well, Heather, what do you think the Fed is thinking? I mean, we have a whole month and a lot of data between now and the December meeting. Will we see a hike and how big might it be? Well, first of all, it's been a great week for the Fed. The midterm elections certainly gives them a lot of breathing room not to have to worry about what President Trump says about lowering interest rates. But, you know, I think for the Fed, the December rate hike was already pretty much baked in. And now it's all but certain after this strong jobs report. The interesting question, though, is what happens in 2027? How much more do they have to hike? And, you know, Catherine made the case that you could make the argument that, gee, things look like they're kind of overheating here. You know, maybe it's going to take several more hikes in 2027. But then, of course, you have what happened with the midterms in AI and all these governors elected who want to put moratoriums on new data center construction, who want to slow down the AI boom. And if that happens, that takes a lot of pressure off next year. Voters were also very clear about their distaste on tariffs and the war in Iran. And so if we don't get more tariffs, if the war in Iran gets wrapped up, and that's a lot of ifs in that sentence, but there is a path where the Fed does not have to hike, maybe only needs to do one more hike next year. And that's what really changed in the last few days for the Fed outlook. More and more people thinking it may only be one more after December. A lot of ifs. Catherine, I want to turn to the stock market for a second. We know markets tend to jostle a bit after an election, but is what we saw in the last couple of days normal? Define normal. The day after the election had, I think, the biggest bump in the stock market in like decades. So that, you know, for a day after an election, I should clarify that that's the disclaimer there, the qualifier there. So markets seemed pretty ebullient initially. And then the next day, obviously, major declines in across all of the indices and it's a little bit hard to to know like how much of that has to do with specific policy concerns like the kinds of things that heather just laid out uh these state and local level politicians who were just elected partly on a kind of anti-ai anti-data center agenda and how much of this is reflective of the kinds of volatility that we had been seeing even before the election in AI sensitive stocks. You know, recall that even before the election, there were concerns about whether the amount of spending that a core weave was doing could ever be made up for in additional revenue. So like some of this is about the election. Some of this is about this uncertainty that has been lingering around this whole sector for a while because it's a new technology, because it's a disruptive technology, and because it's really hard to wrap your head around what the likely set of outcomes would be and the probabilities for each of those outcomes. So I think you're seeing some just continuation of all of that that is magnified, I should say, by some of these electoral results. Heather, I want to, you know, tie all this, the election, back to the jobs report because, You know, not only is inflation a problem, the jobs report tells us that real wages are still behind inflation. And I'm wondering how patient you think Americans are going to have to be before they see some relief. Oh, wow. I mean, come on. We're a seventh straight month here of inflation wiping out all wage gains. And that's painful. That's real pain. This isn't just vibes or perceptions. A lot of households are having to make very difficult choices right now about what to cut back on. The big if, I know we were joking about ifs earlier. The real question is, will the White House act to take the pressure off? And it's really in the White House's court to get this war in Iran ended and to potentially roll back some tariffs. If that happens, you could see inflation come down a little bit and a lot more households breathing easily. Catherine Rampell is with The Bulwark. Thanks, you two. Have a good weekend. Have a great weekend. Wall Street today, a wobbly recovery after a dramatic few days. We'll have the details when we do the numbers. As we just discussed with Catherine and Heather, the October jobs report was rosier than expected. It was particularly rosy for certain sectors and not just the ones we're used to seeing grow. Marketplace's Elizabeth Troval reports on the industries that are hiring and what it might say about the job market. Today's jobs report is another sign that strength in the U.S. economy is broadening, says Yelena Shaletcheva with the conference board. If you look at the labor market, you see strength in both goods and services producing sectors. Manufacturing employment increased. Healthcare is another growing sector, says Andrew Flowers with recruitment technology firm AppCast. And it's been a stalwart industry for job growth, so that's no surprise. The other is the kind of hard hat industries of transportation, all these industries that I would say related to the AI data center build out. Those add jobs as well. But there also were some surprises in today's jobs report. But the third industry that added jobs, and it was such a surprise, is professional and business services. And so this is a real reversal of the white-collar bloodbath we've seen over the past few years. few years. Some of those new roles are. are also connected to AI, says Bill Driscoll with talent and consulting firm Robert Half. You know, where companies thought they might be, you know, able to replace folks with AI, now increasingly they're wanting folks that can interact with AI, you know, and provide judgment, you know, communication, insights in conjunction with AI. He's also seeing employers looking to fill corporate positions in security and data. Anytime you're seeing a lot of data work, that's cleaning up your data to prepare to be able to use AI. And then obviously security is a huge deal right now. He says those roles are more likely to be mid to higher level jobs. Driscoll says the entry level market is also loosening up a bit as companies think about their future workforce. I'm Elizabeth Troval for Marketplace. As you know, interest rates have been rising, and they've been rising for a whole bunch of reasons. There's the Fed, which is expected to keep boosting rates to try to deal with the market. And then there's the Fed, which is expected to keep boosting rates to try to deal with persistent inflation. Then there's debt. The federal government is piling it on, so are data center developers and tech companies. And all that appetite is pushing bond buyers to demand higher interest rates. But there are also some undercurrents that have been putting upward pressure on rates for a while now. One of those is an exodus of buyers for U.S. government debt. Back in 2008, foreign buyers owned around 60 percent of it. Today, that number is just 25 percent. Marketplace's Justin Ho looked into why other countries just aren't that interested in treasuries anymore. Foreign ownership of U.S. debt skyrocketed in the 90s and the 2000s because the U.S. was buying a ton of imports, says Alex Wolff, global head of macro and fixed income strategy with J.P. Morgan. Emerging markets, especially China, were seeing very strong export growth and they were then generating ever-growing FX reserves, foreign currency reserves. As in dollars. Wolff says those countries' central banks needed a safe place to stash away all those dollars. So they more or less would take that surplus and they would just park it into treasuries. These countries bought treasuries because they're one of the safest assets on the planet. They're also easy to sell, so countries could treat their dollar reserves like emergency funds, says Anusha Chari, an economics professor at the University of North Carolina. A country that is, for example, oil dependent needs to maintain buffers of dollar reserves to purchase oil. And that is a way in which you finance imports. Chari says some countries were also worried about their own currencies, especially after they tanked during the Asian financial crisis in the late 90s. Chari says having extra dollars around let a country buy more of its own currency to prop up its value and maintain its exchange rate. And so countries that maintain fixed exchange rates need a buffer of reserves in case foreign investors want to get out of their currency. But Chari says more recently, countries haven't been as concerned about supporting their currencies because their economies have been growing. Countries in Asia, for example, have just become a lot more resilient, right? And so the accumulation has basically stagnated. Chari says some countries have slowed down treasury purchases, including Japan. Others have been selling treasuries, including China and Russia. We see this weird state where treasuries lost their specialness within the space of dollar assets. That's Jesse Schrager, a professor at Columbia Business School. He says that special role treasuries used to play for foreign countries allowed the U.S. to pay lower yields on its debt since those foreign central banks that were buying it up didn't really care about the interest rates they were getting paid. And so you're willing to basically say, you know what, I'm going to earn less of a return on that asset in order to get the convenience of being able to actually turn it into the things that they need at a moment's notice. But now that foreign central banks don't need to stockpile as many treasuries, they're starting to look more like any other financial asset. If you're just another financial asset that investors are trying to maximize their returns on, the only way in which you can induce investors to actually buy more of you is you can either get safer or you can pay a higher yield. Schrager says it doesn't help that the federal government's been borrowing more over the past 15 years. Now, as the U.S. contemplates borrowing more and more, it doesn't get to actually get that, you know, discount. Which means neither do mortgage holders, auto loan borrowers or anyone else with a loan that's tied to treasury yields. I'm Justin Ho for Marketplace. We've got a newsletter full of all the content we put out across our shows each day, plus a special Friday edition that wraps up the biggest headlines of the week. You can subscribe at Marketplace.org. Coming up. Once you have the snowshoes, it costs nothing to snowshoe. You just go out and do it. Seems like a solid investment. But first, let's do the numbers. The Dow Jones Industrial Average fell 237 points, just under half a percent, to finish at 15%. The Nasdaq added 264 points, one and one-tenth percent, to close at 24,579. And the S&P 500 found 23 points, three-tenths percent, to end at 73.76. For the week, the Dow gave up just over nine-tenths percent. The Nasdaq fell nearly three and four-tenths percent. And the S&P subtracted two and seven-tenths percent. Cloud computing services firm CloudFair reported its third quarter of the year with an increase in the number of shares. Revenue was up 39% over the same time last year. That's pretty much the whole AI boom summed up in one number. CloudFair accumulated nine and nine-tenths percent. Airbnb reported that it's increasing its revenue growth projection for the fiscal year. It's also buying back $12 billion worth of its own shares. Airbnb found 11 and two-thirds percent. Bonds fell. The yield on the 10-year T-note rose to 4.85%. You're listening to Marketplace. This is Marketplace. I'm Kristen Schwab. A 30-year fixed-rate mortgage sits at 7.18% today. That's actually down from its recent high. Mortgage rates have been on the decline for three consecutive weeks. Still, that rate costs a pretty penny. And so do, you know, actual homes. And that's forced, or perhaps inspired, people to find creative ways to purchase property. The mountains are in the mountains. Mountain West News Bureau's Hannah Merzbach followed a group of friends who've banded together to make home ownership affordable and to better navigate its risks. Sandwiched between two highways and a river in North Denver, there's a historically diverse neighborhood called Globeville. Now zoom into a street lined with small bungalows, and there's a big corner house its residents have named Nowhere. How do you describe this color? Like, what is this? I love it. I think it looks like a big red barn. It's a little bit like a little bit of a red barn. It's a little bit of a red barn. Co-owner Elle Rice, a 30-something musician with spiky short red hair, is the first to admit this place needed some work. Rice points to the deck they replaced. There's literally like a bathroom-sized giant hole under this. The mixed-use zoning made the place shine to Rice and the two other owners, their partner and a bandmate. Last year, they pooled their resources to qualify for the nearly $700,000 triplex. They're turning it into an all-ages DIY music venue and also living in it together in separate units. We are punks, but we're also adults and we need to have some personal space. So they're demoing walls for the shared show space and are renting out one unit to help pay the mortgage. Bandmate Schwamm Michael lives in another, with a scraggly white beard. He describes himself as a pirate Santa. I feel like we've solved the problem of how to have the benefits of having roommates and not the drawbacks. So have the community without having to share a kitchen. Michael says he turned 50 this year and has been dreaming of this kind of thing for decades. Seeing the housing market explode after COVID only put him further over the top. I went from being able to afford a two-bedroom house to being able to afford like a studio condo, literally overnight. Home prices ballooned more than 40% and ownership became unattainable for millions of Americans. Initially, all of the conversations I was having was about affordability. That's the group's real estate agent, Sarah Wells, who owns her house with six others and specializes in these kinds of purchases. It's called co-buying and she says it's gotten a lot more popular for friends, siblings, or multi-generational families. Going through COVID and everyone feeling that isolation, I've seen way more people come to us, not just from a place of affordability, but from a place of community connection. If you include unmarried couples, one industry report shows these types of purchases could account for almost one in three. home sales this year nationwide. Though there are some downsides. You're weighed down by the lowest credit score in the group when getting a loan. Plus, Wyoming realtor Rebecca Hess says friend breakups do happen. I think you have to be very wise on how you do it. Have proper documentation sketched out and signed just in case something happens. The nowhere house already has a contract of this kind. It pencils out a clear exit plan if somebody wants to sell and a yearly check-in. None of us care about the Super Bowl and so we decided that Super Bowl Sunday would be a good day to set aside where we go through any projects that we completed that year. Like building the stage in the backyard where Rice and Michael's apocalypse-themed punk folk band performed last summer. Now they're getting the indoor venue up and running. I think that by working on something this big, together, it makes it feel possible. The group plans to officially open Nowhere to the community early next year. In Denver, Colorado, I'm Hannah Merzbach for Marketplace. There's a cycle that comes with job loss. You take a moment or two to process what happened. You begrudgingly start to update the resume, send out applications, and hope for a call. But what if you didn't have to do any of that? What if there was another path? Here's the latest installment of our series, Clocked Out. Hi, I'm Roger Scott. I'm 65 years old and I used to be a software engineer for 30-some-odd years. The last company I worked for before I retired was a small company located in Ithaca, New York. At the end of July of 2020, they laid off several people. And then one Friday morning, first thing today, I got a call from the HR person saying, you know, you're done. It was definitely more difficult finding a new position than I had expected. Living where I do in Boulder, Colorado, I did look into seeing if there were local options, but this was in like August of 2020. All the detectives here were doing fully remote and the hiring situation wasn't, just wasn't fantastic. Cause there was so much uncertainty. I was just having sort of a regular conversation with our, our investment advisor and, you know, sort of talked about my situation and, you know, he just sort of took a quick look over things. And he said, you know, you're just fine now. That sort of changed the whole thinking about the search process. Cause now it completely removed the element of need, need to find a job from a, from an income standpoint. And just made it be what I wanted. How do I want to be spending the hours of my life? It's, it's really been great. Snowshoeing is something we've taken up here and that's, that's really fun. And once you have the snowshoes, it costs nothing to snowshoe. I don't know anybody who sits around saying, what am I going to do today? It's probably the time just goes whizzing past because there's so much stuff you, you want to do. That's Roger Scott in Boulder, Colorado. If you've left the labor force to stay at home, to travel, to start your own thing, we want to hear about it. Head on over to marketplace.org slash clocked out. This final note on the way out today, saw this in Axios. What do the Superbowl, the Oscars and the midterms have in common? They're all TV events that people still watch live. More than 31 million people watched midterm election coverage across 13 news networks on Tuesday. That's a 23%. Increase in eyeballs from 2022. A couple of things to note. The audience was younger and Fox News was the only network where viewership fell. Our theme music was composed by BJ Lederman. Marketplace's executive producer is Nancy Fargali. Joanne Griffith is the chief content officer. Neil Scarborough is the vice president and general manager. And I'm Kristen Schwab. We'll see you back here on Monday. This is APM.