Maybe we should have seen it coming. Job openings had risen nationally in September, jobless claims have been falling like October leaves, and the outplacement firm Challenger, Gray & Christmas reported this week that U.S. companies announced the fewest October job cuts in three years.
Still economists’ consensus was that the U.S. economy would add only 65,000 to 70,000 jobs in October, not the 165,000 that the Labor Department reported this morning. And the government also said the unemployment rate fell from 4.2% to 4.1%, even as labor force participation increased again, indicating that more people were out hunting for jobs.
In September, those applicants were more likely disappointed, as the economy added only a revised 60,000 jobs, up from an original estimate of 29,000. In October, they were more often rewarded, as hirings rose in professional and business services, health care, manufacturing, and transportation and warehousing.
“This jobs report is fundamentally a bullish economic signal,” former NMMA president Thom Dammrich told Trade Only Today. “It strengthens the case for a Fed rate hike because it suggests the economy is performing well and will not require more monetary support.
“For the boating industry, there is a lot more good news here than potentially bad. Stronger employment in better-paying jobs and rising incomes should improve consumer confidence and consumer spending and create a larger pool of potential boat buyers, even if higher interest rates create a small financing headwind for consumers and increase the cost of inventory financing for dealers.”
Dammrich said he thinks the industry should prepare for increased demand heading into the winter boat show season “and should focus on affordability, price and cost of ownership transparency, and meeting the customer where they are. It is a good time for the industry to invest in promoting boating as a lifestyle investment tied to family experiences.”
Ian Wyatt, senior vice president and chief economist at recreational marine lender Huntington National Bank, said the new jobs numbers shifted the narrative on job growth, as the October figure was more than double economists’ expectations and “combined with revisions to prior months, it resulted in a large rise in the three-month moving average, which is now 137,000.
“Recent job growth was averaging around 50,000 a month, which is about where the Fed thinks is the break-even for the economy that keeps the unemployment rate stable,” Wyatt told Trade Only Today. “Much stronger job growth gives the Fed more room to hike the federal funds rate, and the probability of a December rate hike rose on the news. SOFR-based floorplan loans move largely in lockstep with the fed funds rate.”
The economy added 70,000 jobs in October in professional and business services; 42,000 in health care; 25,000 in transportation and warehousing; and 19,000 in manufacturing. And the government revised its two previous months’ job figures upward. August’s total moved higher by 53,000, to 186,000, and September’s figure grew from 29,000 to 60,000, leaving the two-month total 84,000 higher.
“While job growth was broad-based, the strongest wage growth is in blue-collar sectors like utilities, construction and manufacturing,” Wyatt said. “Auto dealers we talk to in areas of heavy data center construction are seeing a lot of blue-collar buyers looking for loaded heavy-duty trucks. This could be a good customer base for boat dealers to target.
“On the other hand, with mortgage rates near the highest levels in decades, we are seeing evidence consumers are hesitating on large discretionary purchases, with flat jewelry and furniture sales and a pullback in residential construction. Boats face the same challenge — high borrowing costs and high fuel costs are making the consumer hesitate on purchases like boats. In our research, consumers tend to have a relatively short memory with fuel-price shocks. Once fuel drops down again, consumers’ preference for more fuel-efficient vehicles fades back to prespike levels in six to 12 months.”
Dammrich, who is now an adviser with Global Marine Business Advisors, said several aspects of the jobs report point to a strong and resilient economy.
“If you include the strong corporate profits we are seeing, rising job openings, lower jobless claims, few announced layoffs and very strong job growth, you have a picture of an economy that is expanding rather than slowing,” he said.
“And we see that in recent GDP growth numbers, as well,” he added. “That many of the new jobs reported are in better-paying occupations is particularly important for the boating industry. The consumer who just got a stable, well-paying job is more likely to purchase a first boat, upgrade to a larger boat, or invest in accessories or equipment.”
Wage gains saw an encouraging increase in the October report, although pay hikes again failed to keep up with inflation. Average hourly earnings for all workers on private nonfarm payrolls rose 14 cents, or 0.4%, to $38, topping economists’ expectations.
During the past 12 months, worker earnings have risen 3.1%, leaving them trailing the 3.6% year-over-year increase in September for the Personal Consumption Expenditures Price Index. The PCE index is the Federal Reserve’s preferred inflation gauge.
The consumer’s mood also appears to be mildly improving. The University of Michigan said this morning that its preliminary Consumer Sentiment Index for November rose 3 points, or about 6%, to 51.
“Modest improvements in multiple domains, including expected personal finances and business conditions, were concentrated primarily among independents,” Joanne Hsu, director of the university’s Surveys of Consumers, stated in a press release.
Sentiment for Democrats and Republicans continued to trend lower.
“While sentiment lifted for lower- and middle-wealth consumers, it fell 5% for those with the largest stock portfolios in the wake of a relatively turbulent period in stock markets,” Hsu added. “Moreover, consumers’ comments revealed growing anxiety over a possible AI bubble. AI worries, however, were dwarfed by cost-of-living concerns, which continue to be at the forefront of consumers’ minds across the population. About 57% spontaneously mentioned that their living standards have been eroded by high prices, the highest seen since May and up from 46% in February, just prior to the Iran conflict.”
Hsu also noted that even with the early-November improvement, the sentiment index is down 10% from February.
