Traders are eagerly awaiting October's official jobs data, set for release on Friday at 8:30 a.m. ET - widely viewed as the week's most crucial economic event.
The Employment Situation report is expected to provide valuable insights into the resilience of the U.S. labor market, especially in light of recent disruptions from hurricanes, strikes and uncertainties surrounding the imminent U.S. elections.
What are economists forecasting, and how have markets responded to recent jobs reports?
October Jobs Report: What Do Economists Expect?
The consensus among Wall Street economists is forecasting a sharp deceleration in the pace of employment growth in October.
Nonfarm payrolls are expected to slow down from 254,000 in September to 113,000 in October, an outcome that would represent the lowest monthly employment gain since April, suggesting that U.S. firms have hold back in their hiring plans.
"We expect nonfarm payrolls to rise by 100,000 in October after coming in at 254,000 in September. Although this is below consensus, we'd still view it as a solid print, since we estimate that Hurricane Milton and the Boeing strike temporarily lowered payrolls in October," Bank of America economist Shruti Mishra stated.
According to Bank of America, Hurricane Milton's landfall in Florida on Oct. 9, which coincided with the jobs survey week, likely weighed on payroll figures, particularly in sectors like leisure and hospitality. Additionally, lingering effects from Hurricane Helene, which struck in late September, may have added a slight drag on employment.
Bank of America analysts also noted that the Bureau of Labor Statistics estimates a 41,000 increase in striking workers from September to October, largely driven by the Boeing Co. BA strike. Taken together, these factors could have reduced October payrolls by at least 50,000 jobs.
On the positive side, government payrolls may see a 25,000 boost due to temporary hiring for election-related roles.
Looking at other indicators in the October jobs report, the unemployment rate is expected to hold steady at 4.1%, suggesting that the pace of job losses has also not advanced.
Wages are broadly expected to hold their recent trend, as average hourly earnings are expected to surge 0.3% month-over-month, down from 0.4% in September, and by 4.1% year-over-year as seen in the previous month.
Recent Data Shows Potential For Positive Employment Surprises
Earlier this week, the ADP National Employment report showed that private payrolls surged by 233,000 in October, sharply accelerating from 143,000 in September and well above economist expectations of 115,000, as tracked by TradingEconomics.
Nearly the whole increase in private employment came from services, with education, health services, trade, transportation, utilities and leisure and hospitality being the most active in the monthly increases.
The ADP data - which uses anonymized payroll data of more than 25 million U.S. employees - offered encouraging insights ahead of Friday's official jobs report, suggesting the U.S. economy likely maintained robust job growth throughout the month.
"Even amid hurricane recovery, job growth was strong in October. As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient," said Nela Richardson, chief economist at ADP.
Stock Reactions To Recent Jobs Reports
The last three jobs reports have highlighted how market sentiment shifts depending on whether employment numbers come in hotter or cooler than expected.
In the July jobs report, released on Aug. 2, the U.S. economy added 114,000 jobs, later revised up to 144,000 - significantly below the consensus estimate of 175,000. On that day, the S&P 500, tracked by the SPDR S&P 500 ETF Trust (NYSE: SPY), dropped 1.9% as investors grew concerned about potential economic slowdown.
Another cooler-than-expected report arrived with the August jobs data, published on Sep. 6. The U.S. added 142,000 jobs in August, missing forecasts of 160,000. The S&P 500 responded with a 1.7% decline, reflecting ongoing worries about weakening labor market momentum.
In contrast, the September jobs report, released on Oct. 4, showed the U.S. economy added a robust 254,000 jobs, well above the revised 159,000 in August and far exceeding expectations of 140,000. This marked the strongest job growth in six months, significantly above the prior 12-month average of 203,000.
The S&P 500 responded positively, rallying 0.9% on the day as investors saw this as a sign of resilience in the labor market.