Trading United States Nonfarm Payrolls Report

Noise in the October jobs report from Hurricanes Helene and Milton as well as multiple strikes meant that the mere 12K rise in nonfarm payrolls was taken with a large grain of salt. However, through the temporary distortions, the report showed signs of continued softening in the labour market. Job growth in August and September was revised down by a cumulative 112K, suggesting September’s stellar employment report was not as strong as previously believed, hiring was primarily driven by the healthcare and government sectors, and the unemployment rate, which is much less influenced by the hurricanes and strikes, rose by nearly one-tenth of a percentage point on an unrounded basis.

We expect hiring bounced back in November, with payrolls rising by 230K. The conclusion of a number of strikes, most notably at Boeing, should boost hiring by roughly 40K for the month. We also look for payrolls to be lifted by the resumption of normal business operations in the Southeast after the disruptions caused by the recent hurricanes. That said, the lowest survey response rate in more than 30 years along with the historical trend for upward revisions following major hurricanes suggests that some of the storm-related rebound could show up in the monthly revisions, rather than November’s headline number.

Through the monthly swings of nonfarm payrolls, we expect the November employment report to reiterate that while the labour market remains solid in an absolute sense, the softening trend in employment conditions has yet to cease. That message is likely to come through more clearly from the unemployment rate, which we look to rise to 4.2%. The cooler backdrop should keep a lid on average hourly earnings growth (AHE). We expect AHE to rise 0.3%, which would lead the year-over-year rate down to 3.9%.