US jobs report preview

What to expect from today’s jobs report?

During the US session today, traders and investors will be waiting for the release of the US Jobs Report for the month of October, which might have a major impact on the markets, depending on how significant the surprise will be, whether positive or negative.

Over the past few weeks, some economic data related to the labor market suggests that today’s jobs report is likely to be mixed.

The table below summarizes some of the related labor market data.

The ISM Manufacturing Employment Index shrunk again to 46.8 in October down from 51.2, which is the lowest level since July of this year.

Although the ADP Non-Farm Employment Change increased by 113K in October, it came well below the market estimates of 130K.

The Challenger Jobs Cut showed an increase for three months in a row, not seen since April of this year.

Continuing Claims also posted the highest level since 2021 with 1818K up from 1705K, while the 4-week MA of Jobless Claims increased slightly.

The only positive outcome came from the JOLTS Jobs Openings which advanced for the 2^nd month in a row, posting the highest level since May.

Market expectations*

In general, market estimates point to a softer jobs report compared to the previous one. However, the most important indicator might not be what you think in today’s report. It’s not about how many jobs the economy added last month, but it’s about the wage growth.

A few days ago, the Employment Cost Index ticked higher in Q3 to 1.1% up from 1.0% in Q2, suggesting a possible inflation in wages.

Scenarios

Wage growth remains the key in today’s report, even if the economy added more jobs than expected. Below are the possible scenarios.

A better-than-expected report including new jobs, unemployment, and wage growth would refuel the expectations of another rate hike in December. In return, Dollar might rally once again, while indices and commodities are likely to take another dip.

A negative report, including lower jobs created, higher unemployment, and lower wage growth, would confirm that the Federal Reserve’s tightening cycle is over. In return, the Dollar might dip below 106.50, while commodities and indices are likely to welcome such an outcome.

A mixed report such as lower jobs and higher wages with a higher unemployment rate would lead to a limited reaction and the market focus might shift to next week’s economic releases.

*according to CNN

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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