The standing consensus forecasts are for a 180,000 rise in non-farm payrolls last month, an unchanged jobless rate at 3.9% and a cooling of annual wage growth to 4.0%.
But this week’s private sector jobs report for the same month was below forecast, weekly jobless crept higher, layoffs are rising sharply, job openings fell faster than expected for October and employment costs were revised down.
But a curious twist this month centres the closely-watched ‘Sahm rule’ threshold, that has historically shown recession is underway when the three-month rolling average unemployment rate rises half a point above the low of the prior 12 months.
Developed by Fed economist Claudia Sahm before the pandemic as a potential rule of thumb for triggering benefit payments – the gauge hit 0.33% last time out for the first time since March 2021 and could sound the alarm if November’s jobless rate tops 4%.
An added complication reading the report is the ending of the autoworkers and actors’ strikes that have distorted jobless readings somewhat.
About 25,300 members of the United Auto Workers union ended their strikes against Detroit’s “Big Three” car makers on Oct. 31, which had depressed manufacturing payrolls that month. Payrolls also likely got a lift from 16,000 members of the SAG-AFTRA actors union going back to work.
All of which has markets consolidate the week’s strong bond and stock gains on Friday, driven largely by headlong market bets on Fed easing next year. Fed futures now see more than a 50% chance of the first Fed rate cut in the cycle coming by March, two quarter point cuts by June and 125 bps of easing by the end of next year.
While two-year Treasury yields have been a bit more reserved this week, 10-year yields tested 4.1% for the first time since June – before backing up about 7 bps today ahead of the jobs report. But the big swings in Treasuries have spurred volatility gauges to the highest since October.
