October Jobs Report Expected To Show Dip — Here's How Markets May React

Traders are eagerly anticipating the release of the October jobs market report, which is scheduled to be unveiled by the Bureau of Labor Statistics on Friday. This report is expected to provide valuable insights into the current state of the labor market, potentially affecting traders expectations on future Fed interest-rate moves.

In September, U.S. private sector businesses added 336,000 non-farm payroll jobs, marking the highest increase in eight months and significantly surpassing expectations, which were set at 170,000.

Investors will try to gauge whether labor market tightness remains prevalent even after the strong momentum observed during the summer months.

At the latest Federal Open Market Committee (FOMC) meeting, the Federal Reserve has signaled that while job gains have moderated compared to earlier in the year, they still remain robust, and the unemployment rate remains at a low level. Policymakers have also cautioned that tighter financial and credit conditions for both households and businesses could exert downward pressure on economic activity and hiring in the coming months.

October’s Jobs Report: What Are Economists Expecting?

• Non-farm payrolls: According to the consensus of Wall Street economists, NFPs are expected to sharply fall from 336,000 in September to 180,000 in October. This figure would represent the lowest employment gain since June.
  
• Unemployment rate: It is expected that the unemployment rate will remain stable at 3.8%.
  
• Wage growth: Forecasts suggest a decrease in average hourly earnings, with year-on-year growth projected to ease from 4.2% in September to 4% in October. This would represent the lowest reading since June 2021.

How Did Markets React To Prior Jobs Reports?

The table below offers a concise overview of the most recent three Non-Farm Payrolls (NFP) reports, coupled with the immediate 1-day percentage fluctuations in three prominent assets: the SPDR S&P 500 ETF Trust SPY, the iShares 20+ Year Treasury Bond ETF TLT, and the DXY (U.S. Dollar Index).

Surprisingly, the stock market displayed a positive response to the most recent NFP readings that exceeded expectations. As expected, instead, the bond market endured losses, as investors perceived the strength of the labor market as a potential catalyst for the Federal Reserve to maintain a more stringent monetary stance. The U.S. Dollar Index exhibited mixed responses to previous NFP data releases.

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