LinkUp Forecasting That the U.S. Economy Lost 5,000 Jobs in October
The U.S. labor market has moved well beyond 'softening' or 'cooling' and the economy most likely lost jobs in October.
Like a horror movie where the lights go out right as the serial killer approaches (or the arsonist as the case may be), the U.S. economy and arguably the entire country are living through precisely such a dire scenario. Amid the chaos, destruction, and decimation, with peak uncertainty continually ascending to new heights, we’ve lost whatever light official government data had been shining onto the situation, as dim as that illumination may have been of late.
So here we are, entering month two of the government shutdown, and everyone is stumbling around in the dark trying desperately to make sense of what the hell is going on as we attempt to navigate our way out of the carnage. And just like every cliché-ridden slasher flick, the protagonists are evenly divided as to how to best proceed, arguing vehemently among themselves as doom approaches.
In a great piece this week entitled ‘Three Theories About the Economy,” TS Lombard’s Dario Perkins writes:
The US cyclical outlook seems murkier than ever, and now there are three competing views about what is going on:
The Bears: We’re close to a major cyclical turning point
The Bulls: It’s just the “K-shaped economy” (stupid...)
The er….Reality: It’s the Trump policy storm, which will eventually pass.
While there is truth to the K-shaped economy (see my Macro Picture on Wall Street vs Main Street) and we cannot totally rule out the bears’ recession, TS Lombard belongs to the camp of those who subscribe to Theory 3 and blame Storm Liberation Day. 2025 has been all about two things: massive uncertainty (from all the chaos and flipflops) and big negative supply shocks from tariffs and immigration.
TSL’s house view is that uncertainty in the first half of the year forced companies to stop hiring and stop investing and that as the most acute phase of the chaos subsides in the second half of the year and into 2026, pent-up demand and the Fed cuts will reaccelerate the economy, potentially spurring wage growth and an uptick in broader inflation.
Perhaps the economy will deteriorate more in the short term; but since there is nothing fundamentally wrong with it and even more policy stimulus will be forthcoming, that just means a stronger revival in 2026.
TS Lombard’s long-held view was most certainly vindicated this week with Powell’s more than cautious tone about the certainty of a December rate cut that’s been baked into the markets. And while we have generally shared a similar view about the persistently strong fundamentals of the economy, reaffirming, albeit with deteriorating confidence levels, our ‘muddle-through’ outlook less than a month ago, we’ve tended to be, and still remain, a solid notch (or two) more negative in our assessment of the situation, especially over the past 6 months, and more pessimistic in our medium and long-term outlook.
Our base case all year has been grounded firmly in the stagflationary camp, but as we’ve noted repeatedly, that’s always been our best case scenario, with a recession being the next most probable scenario and a complete meltdown being the least likely, but still alarmingly high relative to where it would normally be.
From our perspective, not only is it getting increasingly difficult to see how this thing ends well, the downside risk to employment seems to be growing appreciably by the day, as does the probability of the crumbling labor market cratering altogether and igniting a full-blown recession.
As we wrote earlier this month, labor demand has dropped 8% since April 1st and 13% since the election. Not surprisingly, hiring has come to a grinding halt, with average monthly job gains dropping from 120,000 in the first 4 months of the year to 25,000 in the subsequent 4 months.
Given the 3% decline in our weekly job vacancy data in October and what that portends for job growth (or lack thereof) for the remainder of the year, we’ve moved well beyond a “softening” or “cooling” labor market. It truly is beginning to crumble.
Notably, weekly job openings in the U.S. now sit at 2.95M, precisely where they stood the week of March 14, 2020 just as the country went into quarantine.
What a ride.
And by no means is it over.
This ‘No hiring/No firing/No quitting’ labor market is rapidly shedding the ‘No Firing’ component of its moniker as layoff announcements are now becoming a daily phenomena with the most recent batch including Amazon, Meta, UPS, Target, Paramount, Rivian, Molson Coors, Chegg, Applied Materials, Booz Allen, and GM, among others. And let’s not forget the thousands of Federal workers that are being fired during the shutdown (or the DOGE casualties who were fired earlier this year).
Yes, the economy has held up remarkably well through the storm, thanks to the soft landing ballast, but it’s beginning to feel like we need to upgrade things to a category 5 hurricane.
Real income growth is falling, particularly among workers 25-54, AI is beginning to surpass robots in the race to see which tech phenomena annihilates more jobs faster, consumer sentiment continues to slide, and the only reason unemployment hasn’t shot up is because of the massive labor supply shock from the immigration/deportation regime and a plummeting labor force participation rate.
Beyond the labor market, the government shutdown continues to drag on, Bad King Don’s never-ending tariff tantrums are starting to inflict real pain on businesses, farmers, and consumers, inflation is never coming down (just like we said), the Big Beautiful Bill is a ticking time-bomb across multiple vectors, and this bubble of a market is most assuredly going to pop one way or another, sooner or later. Imagine what happens when the top of the K crashes into the soup lines.
And if all of that isn’t enough, I’d note that we haven’t even touched on what we expect things to look like next year in the run-up to the election with brown shirts on every city block. As we’ve said in the past, whatever anyone’s doomsday scenario looks like, I’ll take the over. But we’ll save that for later - our October NFP forecast is depressing enough.
Based on our forecast of a net gain of 80,000 jobs in September, combined with the decline in new and total job vacancies in September (-4% and -2% respectively), our October non-farm payrolls forecast is -5,000 jobs.
Who knows what will happen to unemployment, but we have to imagine it’s going to jump up one of these months.
Were the BLS to have issued its October report next Friday, it would have been a sight to behold to witness the simultaneous triggering of both the Perkins and Sahm rules in a single report. What a shame. But in the absence of the BLS report, we’d offer the Dayton Rule, one that needs no official data: When the East Wing is reduced to rubble, it’s time to head for the hills.
How’s that for a spooky Halloween?