Uncertainty Surrounds Upcoming Jobs Report
There is a growing uncertainty about what to expect from the upcoming jobs report. This follows a disastrous JOLTS report and a strong weekly jobs report. Some anticipate an impressive number, while others are preparing for a negative result. This article provides a brief overview of what might be expected.
Anticipation for October's US Non-Farm Payrolls
The US non-farm payrolls for October will be released tomorrow morning, just four days before the US presidential election. Albert Edwards from SocGen has noted that given the skepticism surrounding the recent strength of the data, a shockingly weak 'payback' month could make headlines and potentially impact the election outcome.
Fed Governor Waller's Warning
The speculation began with Fed Governor Waller, who warned two weeks ago of a significant one-time drop in this month's jobs report. He stated that the October jobs report, to be released just before the next FOMC meeting, will likely show a significant but temporary loss of jobs due to the recent hurricanes and the Boeing strike. He predicted these factors could reduce employment growth by more than 100,000 this month.
Payroll Plunge Preannouncement
The idea of a payroll plunge preannouncement was then taken up by Claudia Sahm, the Biden administration's favorite house economist. Sahm believes a decline in October payrolls is plausible due to the impact of recent hurricanes and the Boeing strike. She explains this by assuming that the underlying pace of payroll gains is back to its 2017-19 average of 183,000 per month. However, when the impact of the hurricanes and Boeing strike is considered, the lower bound could be almost -50,000.
White House Expectations
The White House is also expecting a lower US non-farm payroll reading for October due to disruptive strikes and the impact of hurricanes. This expectation was explicitly stated by Biden's top economic adviser, Lael Brainard.
Reasoning Behind Preannouncing a Negative Print
The reason for preannouncing a negative print is that when it does occur, regime and establishment economists can claim they had warned of it, and suggest it be ignored as a one-time event. However, this strategy may not be effective. A very poor economic data release, such as a negative jobs print, just before an election can significantly harm the incumbent.
Bottom Line
The bottom line is that the surprisingly weak September JOLTS data suggests a very weak payroll report on Friday morning is entirely plausible. This probability was somewhat diluted by today's unexpectedly strong initial jobless claims report. However, if a negative jobs print occurs, it would truly be a shock, as the last time this happened was in 2020. What are your thoughts on this matter? Share this article with your friends and sign up for the Daily Briefing, which is available every day at 6pm.
