The 40-day General Motors strike, which just ended, threatens to make the October jobs report look bad when the number is reported this coming Friday. According to an estimate by Capital Economics, employment will inch up a mere 25,000 jobs for the month.
The reason will be “not so much economic weakness but a specific situation, i.e., the GM strike,” wrote Brad McMillan, chief investment officer for Commonwealth Financial Network, in a research note. McMillan’s firm uses Capital Economics as a consultant.
If such a drop happens, it will be a stark contrast to the September job growth figure, 136,000, which sent the US unemployment rate to a 50-year low of 3.5%, from 3.7%.
The strike at the automaker involved 48,000 workers, although another 200,000 were affected at suppliers, McMillan noted. Overall, Capital Economics expects the loss to be 80,000 jobs, which he said sounded “reasonable.” The previous GM strike, in 1998, lopped 132,000 jobs from employment, he said.
“Since the industry now employs fewer people, the damage is likely to be less” in 2019, McMillan emphasized. “But even so, the effects of this strike would wipe out most of September’s job growth.”
The Commonwealth CIO portrayed a big strike-related job drop to be just temporary. He said people should not be “alarmed” once they see the October jobs number. “Most of this damage will be reversed when the strike ends,” he said, “and we can expect job growth to tick back up.”
Good thing. Slowing US manufacturing and consumer confidence lately have many market participants wondering if the economic recovery is running out of fuel.