By Jeffrey Bartash

The Fed will look at the October employment report and likely cut interest rates again

The final US jobs report ahead of the presidential election is expected to be a doozy, but it’s not Washington’s doing. Instead, the culprits would be a major blow to Boeing and a pair of deadly hurricanes.

Here’s what to watch for in Friday’s October employment report.

Number of jobs in the title

Economists polled by the Wall Street Journal forecast 110,000 new jobs in October, down from a whopping 254,000 gain in September. Some analysts are predicting lower earnings or even an outright decline.

A strike at Boeing ( BA ) and several smaller labor disputes could cut 40,000 jobs, economists at Oxford Economics estimate.

Damage to homes and businesses from Hurricanes Helene and Milton may have reduced employment growth by another 70,000 jobs, Oxford said, as many people were unable to go to work after the storms.

Also read: The next jobs report could be ‘messy’. Here’s why investors shouldn’t worry.

Surprise jobs?

ADP, the big payroll processor, said 233,000 new private sector jobs were created in October, marking the biggest increase in 15 months.

The report raised eyebrows, but ADP has never been a good point of view in the employment report produced by the US Bureau of Labor Statistics.

The two ratios track closely over time, but often differ widely from month to month. That may be the case here.

Unemployment rate

The US unemployment rate is forecast to hold steady at 4.1% despite the Boeing strike and hurricanes.

Why? The unemployment rate is derived from a separate household survey. Workers who have jobs but are temporarily unable to fill them – for whatever reason – are still considered employees.

The main number of jobs comes from a survey of businesses and is compiled differently.

wages

Hourly wages are expected to rise 0.3% in October, after consecutive 0.4% gains in the past two months. Strikes and hurricanes would play a role in less wage growth.

Annual wage growth is also expected to remain flat at 4%. Wages grew slightly faster than 3% a year before the pandemic.

Takeaway food

The Federal Reserve is almost certain to cut interest rates again next week, regardless of the October jobs report.

Fed officials knew the October jobs report would be messy, but inflation continued to fall, paving the way for another rate cut. Additionally, the Fed does not believe the labor market is a major source of inflation.

What may be of most interest to the Fed in the report are the revisions to the September and August payroll numbers.

The increase of 254,000 new jobs in September is seen as an outlier that cannot be sustained. Wall Street will be watching closely to see if that number is revised lower.

– Jeffrey Bartash

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10-30-24 1505 ET

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