Employers added only 12,000 jobs in October. That seems bad -- but there's a catch

U.S. employers added a scant 12,000 jobs in October — but the labor market is likely not as weak as that number implies.

That's because the number was skewed by an ongoing strike at Boeing and by the impact of Hurricanes Milton and Helene. The unemployment rate, which is less subject to temporary distortions, held steady at 4.1% in October, according to the Labor Department report released on Friday.

Overall the labor market likely is cooling but remains fairly resilient despite the weak October numbers. Nonetheless, the report comes at a sensitive time, just days before a closely-contested presidential election in which the economy is top of mind for voters.

The data also comes ahead of a Federal Reserve decision on interest rates next week.

There is cooling in the labor market

The machinists' strike at Boeing — now in its second month — has idled more than 40,000 workers, accounting for nearly all of the decline in manufacturing employment last month. Striking workers are expected to vote Monday on a tentative contract to end the walkout.

The effects of Hurricanes Helene and Milton are harder to quantify, but the storms almost certainly put a dent in the monthly job total, since they made landfall shortly before the government count was conducted.

Although economists had expected some distortion in the October job tally, the drop was significantly sharper than had been projected. Job gains for August and September were also revised downward by a total of 112,000.

Other indicators point to a more gradual cooling in the labor market. The number of job openings has declined steadily in recent months. And employers are no longer having to compete as fiercely to find workers. Employers' labor costs in September were up 3.9% from a year ago — a smaller annual increase than the previous year.

But the economy remains solid overall

Still, the labor market remains fairly sturdy with low unemployment and recent data indicate the broader economy is growing at a healthy clip, despite widespread frustration with high prices.

Paychecks have been growing faster than prices for well over a year, giving workers a real boost in their buying power.

"You’re still seeing wages and salaries running ahead of inflation," says economist Sarah House at Wells Fargo. "So that’s still really beneficial for overall consumer spending growth and keeping it in the black.”

Consumer spending rose at an annual pace of 3.7% in July, August and September, contributing to solid GDP growth during the quarter.

The Federal Reserve is monitoring both the job market and inflation as it decides how quickly to cut interest rates when it meets on Nov. 6-7. According to the Commerce Department's inflation yardstick, which is the Fed's preferred measure, prices in October were up 2.1% from a year ago — just slightly above the central bank's target of 2%.

Most economists expect the expect the central bank to reduce its benchmark rate by a quarter percentage point when policymakers meet next week. That follows a half-point cut at the last Fed meeting in September.