• News
• Comment(34)
• 2024-08-20

Expectations for U.S. Non-Farm Payroll Report

In the face of stormy weather and industrial strikes, the hiring landscape in the United States during October has languished. Anticipation builds as the forthcoming non-farm payrolls report, set to be released this Friday, promises to offer a clearer glimpse into the current trends within the labor market.

The U.S. Bureau of Labor Statistics is scheduled to unveil its report at 9:30 PM Beijing time. Analysts predict that non-farm payroll employment will see an astonishing increase, forecasting a rise of approximately 214,000 jobs, a significant rebound from the mere 12,000 jobs added in October. This lackluster performance marked the slowest growth since December 2020.

The significance of this upcoming report cannot be overstated for several reasons, one being its positioning as the final comprehensive assessment before the Federal Reserve embarks on its policy meeting slated for December 17-18. Observers are leaning towards a 25 basis point interest rate cut by the Fed, although the data from the jobs report could sway this decision. Kathy Jones, the Chief Fixed Income Strategist at Charles Schwab, expressed optimism: “This should represent a relatively healthy number, as it is expected to bounce back from the job losses due to Hurricane Milton and the Boeing strike.”

Advertisement

Financial reports following the review of October's data might see adjustments, reflecting the fluctuations that often occur in employment statistics during and after the COVID-19 pandemic.

The unpredictability in economic data over the coming months may complicate the Federal Reserve's tasks, casting shadows on future policy decisions. “I expect over 200,000,” Jones continued, “but I’m not entirely sure how much clarity we’ll glean from this employment report due to the weather's unpredictable impact. Will it provide a clear forecast, or will we simply end up with more ambiguous data?”

Clarity is crucial for the Federal Reserve as it navigates through heightened inflation rates and a more scrutinized job market, guiding policymakers to seek a more balanced approach. The context surrounding the October report is essential, given the labor market's overall deceleration since around April, with an average of approximately 128,000 new jobs created monthly and a climbing unemployment rate of 4.1%. The Fed’s aim is to lower its benchmark short-term borrowing rate to a more neutral level to address inflationary pressures while fostering job growth.

Vincent Reinhart, an economist with BNY Mellon and a former Fed official, describes the situation as extraordinarily noisy. “Storms and strikes impact two months of data - the month where people are unemployed and the following month when they return to work,” he stated. Reinhart, who spent 24 years as a Federal Reserve official, elaborates on the Fed’s view, indicating that a slowdown in non-farm payroll numbers is seen as the trend—one that has been sustainable, creating slightly over 100,000 jobs monthly.

Recent signals indicate that while the job market is stabilizing, it isn’t necessarily worsening. The number of initial unemployment claims remains steady around 220,000, although early November claims reached their highest level in about three years. Altogether, these numbers suggest that while businesses are not shedding jobs en masse, they are also hesitant to rehire previously laid-off workers.

An economic snapshot released by the Federal Reserve this past Wednesday, known as the Beige Book summary, indicates that the employee turnover rate remains low. Consequently, very few companies report increasing their workforce, and hiring activity has been subdued. The report notes a low level of layoffs but conveys a cautious tone among employers regarding future hiring. Enthusiasm is notably higher for entry-level and skilled workers.

In the context of escalating job vacancies in October and a slight decrease in employment rates alongside increased voluntary separations, the report highlights a nuanced portrait of the labor landscape. As the Fed contemplates rate decisions and future monetary policy trajectories, these interconnected variables must be weighed thoroughly, alongside the pressing concerns about rising inflation.

Reinhart asserts that if the labor market maintains its steadiness, it is unlikely to contribute additional upward pressure on inflation. “Our strategy is to align demand with the trend. If growth and demand meet the trend, then keeping the labor market as it is would maintain a state of balance,” he asserts.

Beyond the anticipated growth in jobs, it is projected that the unemployment rate will see a slight increase to 4.2% as labor transitions back into the workforce starting in October. Average hourly earnings are also expected to rise by 0.3% this month, showing a year-over-year increase of 3.9%, albeit slightly down compared to the previous month.