The financial world is holding its breath as Friday’s release of the October jobs report looms large, widely considered the most significant economic event of the week. The Employment Situation report, due at 8:30 a.m. ET, promises to shed light on the enduring strength of the U.S. labor market, especially against a backdrop of recent hurricanes, labor strikes, and the looming U.S. elections.
A Slowdown in Job Growth Expected
Wall Street economists anticipate a significant deceleration in job growth for October. The consensus forecast predicts nonfarm payrolls to shrink from September’s 254,000 to 113,000 in October, marking the weakest monthly job gain since April. This suggests U.S. businesses may be pulling back on their hiring plans.
Bank of America economist Shruti Mishra attributes the anticipated slowdown to a combination of factors. Hurricane Milton’s landfall in Florida during the jobs survey week likely impacted payrolls, especially in sectors like leisure and hospitality. The lingering effects of Hurricane Helene, which struck in late September, could have also contributed to a slight dip in employment.
Adding to the headwinds, the Boeing strike, which saw an estimated 41,000 workers join the picket lines from September to October, is expected to have a noticeable impact on October payrolls. These factors combined could have reduced October payrolls by at least 50,000 jobs.
However, a silver lining might be found in government payrolls, which could see a 25,000 boost due to temporary hiring for election-related roles.
Looking Beyond the Headlines: What Else to Watch
Beyond the overall job count, the October jobs report offers valuable insights into other key economic indicators. The unemployment rate is projected to remain steady at 4.1%, suggesting the pace of job losses has not accelerated.
Wages are expected to continue their recent upward trend, with average hourly earnings expected to rise 0.3% month-over-month, down slightly from September’s 0.4% gain. The year-over-year increase in average hourly earnings is anticipated to remain at 4.1%.
Positive Surprises on the Horizon?
While the consensus forecast points to a slowdown in job growth, recent data suggests potential for positive surprises. The ADP National Employment report, released earlier this week, showed a surge in private payrolls by 233,000 in October, significantly exceeding expectations and indicating robust job growth despite hurricane recovery efforts. This optimistic data could fuel hope for a stronger-than-expected October jobs report.
Market Reactions to Recent Jobs Reports
The past three jobs reports have highlighted how market sentiment swings depending on whether employment numbers come in stronger or weaker than anticipated. In July, a disappointing job growth figure led to a 1.9% drop in the S&P 500. Similarly, August’s weaker-than-expected report triggered a 1.7% decline. However, September’s strong jobs data resulted in a 0.9% rally in the S&P 500, as investors cheered the resilient labor market.
Friday’s October jobs report will undoubtedly be closely watched by investors, who will be eager to gauge the health of the US economy and its implications for the stock market. The report’s impact will be felt far beyond Wall Street, providing valuable insights into the broader economic landscape and the direction of the U.S. labor market.
