NFP Preview: Forecasts from nine major banks, employment remains fairly healthy

We expect 230K new jobs to have been created in October, which would be roughly in line with the average for the last six months. From the Fed's point of view, this would probably still be (too) high. Such a gain would not be a signal that the labour market is tightening and that wage pressures are easing. However, as Fed officials have recently tended to tone down expectations of rate hikes despite strong economic data, we would not see such a figure as a reason for a rate hike, at least as long as the Fed's communication does not change significantly.

We expect NFP growth to cool back towards the pre-September trend at 180K, yet still continue illustrating solid labour market conditions. Policymakers will keep a close eye on the earnings growth as well as the Q3 employment cost index to gauge how underlying inflation risks are developing.

We expect the headline to come in at 140K. We also see the unemployment rate remaining at 3.8%.

Following September’s leap of 336K, the market is expecting a much weaker outcome of 175K in October. Recent jobless claims numbers have suggested that while firing remains historically low, the rise in continuing claims hints at increasing difficulties with finding new work. We expect unemployment to remain at 3.8%, but wage growth could slow to 4% YoY, which would mark a post-pandemic period low. This should offer encouragement to the Fed that pipeline price pressures are easing and that it doesn't need to raise interest rates any further.

Hiring could have been subdued in the month if previously released soft indicators such as S&P Global’s Composite PMI are any guide. Layoffs, meanwhile, may have increased slightly judging by a small rise in jobless claims between the September and October reference periods. With these two trends reinforcing each other, we expect job creation to have decelerated to a still decent 175K in the month. The household survey could show a similar gain, a development which would translate into a one-tick decline in the unemployment rate to 3.7%. This call assumes the participation rate slid to 62.7% from 62.8%.

We look for a 208K gain in payroll employment. Still, labour demand has also been slowing under the surface in the US with job openings drifting lower and wage growth slowing. We look for the unemployment rate to tick up to 3.9% (despite higher employment) after climbing to 3.8% over August and September from 3.5% in July.

We estimate a 190K gain for October, which assumes a 35K reduction due to increased strike activity. 

We expect NFP to rise by 160K in October, although with some temporary weakness due to the ongoing autoworkers strike. Absent the strike effect, we would be estimating a solid 190K increase. We also expect a 0.3% MoM increase in average hourly earnings in October, although with downside risks of a print that rounds to 0.2% and the unemployment rate to decline modestly to 3.7% in October, although with risks slightly tilted towards the upside for a print that remains at 3.8%. One issue worth watching over the coming months is a recent rise in continuing jobless claims.

We expect healthcare and government sectors to continue their strong pace of hiring and provide a high floor for job growth. Despite representing just under 30% of employment, these two sectors have accounted for 60% of the jobs created since the start of the year, or an average of 134K per month. Other sectors have shown an increased pace of hiring in recent months as well, consistent with a broadening of demand pressures. The participation rate and the unemployment rate should remain unchanged in the month. We are slightly above consensus this week on jobs. Markets will start beating the drum for the Fed to tighten further if job gains turn well north of 200K again or there are material revisions to previous months. 

We expect the pace of hiring to slow in October and forecast employers added 190K jobs last month. We forecast the unemployment rate to hold steady at 3.8% in October. We also anticipate wage growth continued to cool in October. Growth in the labor force has helped restrain wage growth even as hiring has remained hot in recent months. We forecast average hourly earnings rose 0.3% in October, which would still translate to the slowest pace of annual wage gains in two years.