Preview | US October nonfarm payrolls due Friday: September gain of only 29,000, first payrolls report since two Fed voters called for a rate hike

The US Bureau of Labor Statistics (BLS) will release its October employment report at 21:30 Beijing time on Friday, November 6. It is the first nonfarm payrolls report since the Federal Reserve held rates steady in October on a 10-to-2 vote, with two voting members favoring a hike, and one of two jobs reports before the December 8–9 policy meeting. Nonfarm payrolls rose by only 29,000 in September, and the unemployment rate was 4.2%. According to a weekly preview published by Dow Jones Newswires on November 2, economists expect October payrolls to rise by 62,000 and the unemployment rate to hold at 4.2%.

September payrolls rise only 29,000, with July and August revised down by a combined 60,000

The BLS reported on October 2 that nonfarm payrolls rose by 29,000 in September, against a FactSet consensus estimate of about 90,000; the unemployment rate was 4.2%, with 7.1 million people unemployed. July was revised from a gain of 21,000 to a decline of 10,000, and August from 162,000 to 133,000, a combined downward revision of 60,000 for the two months. In September, average hourly earnings for all employees on private nonfarm payrolls rose 0.1% month on month to $37.81 and 3.0% year on year; the labor force participation rate was 61.8%.

On labor demand, the BLS reported on November 3 that job openings and the openings rate were little changed in September at 7.5 million and 4.5%, respectively, with August openings revised up to 7.2 million; quits increased to 3.4 million, and layoffs and discharges were little changed at 1.6 million.

Fed holds rates steady, with two votes for a hike

After raising rates by 25 basis points on a 12-to-0 vote on September 16 (early on September 17, Beijing time), the Fed announced on October 28 (early on October 29, Beijing time) that it would keep the target range for the federal funds rate at 3.75%–4.00%. The vote was 10 to 2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack favoring a 25-basis-point hike. The statement said job gains have kept pace with the workforce and the unemployment rate has changed little, and that inflation remains elevated. At the post-meeting press conference, Fed Chair Warsh said the unemployment rate is lower than a year ago and that, on the employment side, conditions are "quite positive."

Inflation has continued to pick up. The Bureau of Economic Analysis (BEA) reported on October 29 that the September PCE price index rose 3.6% year on year, a larger increase than in August, and core PCE rose 3.1% year on year. According to Reuters on November 3, citing CME FedWatch, traders saw about a 79% probability that the Fed would raise rates in December. The Fed's next policy meeting is scheduled for December 8–9, with the decision due early on December 10 Beijing time, along with the Summary of Economic Projections; the November jobs report is scheduled for December 4, before the meeting.

After the last payrolls report: hike bets ease slightly, US stocks close higher

The September payrolls data were released on October 2 and came in far below expectations, and markets further scaled back bets on an October Fed hike. According to Reuters, citing CME FedWatch, the probability of an October hike fell to 22.7% that day, from 24.4% in the prior session and 64.2% a week earlier. Treasury yields initially fell after the data and then turned higher; according to US Treasury data, the 10-year yield rose to 5.28% from 5.24% the previous day. That day, the Nasdaq Composite rose 1.2% to 27,190.86, the S&P 500 rose 0.7% to 7,722.72, and the Dow rose 0.5% to 51,176.96; spot gold rose more than 1% at one point before turning lower. The Fed subsequently held rates steady at its October meeting.

Jobs data affect Treasury yields and the dollar through rate-hike expectations, and in turn pass through to gold and equities. Before the December meeting, the October and November jobs reports and the October CPI, due on November 10, will together shape how the market prices a December hike.

Other events this week: midterm elections, Bank of England decision

Voting in the US midterm elections takes place on November 3, US local time, with control of both chambers of Congress in focus. The Bank of England will announce its interest rate decision and publish its Monetary Policy Report at 20:00 Beijing time on Thursday, November 5; at its September meeting it voted 6 to 3 to hold Bank Rate at 3.75%, with three members favoring a hike to 4%.

Risk notice: This material is for reference only and does not constitute investment advice. Financial markets involve risk, and past performance does not indicate future results.