Today’s Jobs Report: What to Expect From October Payrolls Data

A slowdown in hiring in October would mark a return to what had been a more moderate pace of monthly job growth that began early this year. September proved something of an outlier, coming in at more than double the pace economists had forecast, as soaring consumer spending over the summer fueled demand for workers in the leisure and hospitality sector. 

In October, that trend likely faded. Economists expect leisure and hospitality hiring to have slowed and manufacturing employment to have contracted, largely due to the 30,000 autoworkers on strike during the month.

The October jobs report will take on heightened importance because it is one of the last major economic data sets released before the Federal Reserve meets again in December. At that point, Fed officials will decide whether or not to raise interest rates by another quarter percentage point.

Fed Chairman Jerome Powell left the door open on Wednesday to another interest-rate hike next month, and pointed to the October and November jobs reports as two key pieces of information that will help officials make their decision. 

Powell also suggested, however, that the threshold for raising rates again is higher now that inflation is cooling and policy is firmly in restrictive territory. A jobs report in line with forecasts is unlikely to fuel expectations that another interest-rate hike will be needed.

“The bar has risen for stronger jobs growth to trigger more policy tightening, in our view,” a team of
BNP Paribas
economists led by Carl Riccadonna wrote. “As long as solid job growth is accompanied with moderation in wages, the Fed will remain patient.”

Average hourly earnings will be key to watch in the October report because of the way wage growth feeds directly into services inflation. One reason why September’s jump in job creation didn’t lead the Fed to hike rates at this week’s FOMC meeting was that wage growth had moderated, suggesting the labor market remained strong but not wasn’t overheating in an inflationary way.

Economists expect that average hourly earnings rose 0.3% in October, up from a 0.2% monthly pace in September, to reach a 4% year-over-year rate, down from 4.2%.

Also worth watching in the October data: the size of revisions to previous months’ figures. Each monthly payroll figure is updated twice as further data become available, and revisions have been “atypically volatile” in recent months, as Aaron Terrazzas, chief economist with the job site Glassdoor, put it. 

Significant revisions to the upside could lead to heightened concerns that the still-tight labor market is reheating, while sizable revisions in the opposite direction could suggest a long-anticipated loosening of the labor market—which could lead to a rise in unemployment—is closer than realized.

“The vulnerability of the macro labor market and economic narrative to revisions that are usually a footnote betrays the frail convictions underlying our collective sense of where the economy is headed,” Terrazzas wrote.

The Labor Department will release the October jobs report on Friday at 8:30 a.m. ET.

Write to Megan Cassella at [email protected]