Credit Ágricole: US October Jobs - FJElite

September’s weaker-than-expected payrolls followed a strong August report, with recent employment data showing considerable monthly volatility. However, the underlying picture remains consistent with a relatively stable labour market, and there is little to suggest the Fed’s assessment has changed materially. October payrolls are forecast to rise by 65k, rebounding from 29k in September but remaining below August’s 133k. Given the sharp reduction in breakeven job growth following changes to immigration policy, this would still represent a solid pace of hiring, lifting the three-month average to 76k from 51k.

The unemployment rate is expected to hold at 4.2%, remaining historically low, while average hourly earnings should rebound to 0.3% month-on-month after September’s 0.1% increase. Annual wage growth is nevertheless forecast to ease to 2.9% from 3.0%, reinforcing the view that labour-market conditions are not currently a significant source of inflationary pressure. September’s rise in unemployment was largely driven by stronger labour-force participation rather than deteriorating employment, with the Sahm Rule threshold still comfortably out of reach.

An employment report broadly in line with expectations would leave the Fed focused primarily on inflation rather than labour-market weakness. Although downward revisions to historical PCE data contributed to October’s decision to hold rates, September’s inflation figures were less encouraging. The base case therefore remains for a further 25bp hike in December.