October Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for October. The consensus is for 168,000 jobs added, and for the unemployment rate to be unchanged at 3.8%.

There were 336,000 jobs added in September, and the unemployment rate was at 3.8%

From BofA economists:”For the October employment report, we forecast nonfarm payroll job growth will slow from 336k in September to 230k … Given our expectation for the participation rate to hold at 62.8% and for job growth to be strong, we expect the unemployment rate will fall to 3.7% from 3.8%.”From Goldman Sachs: “We estimate nonfarm payrolls rose by 195k in October … tight labor markets may have incentivized a pull-forward of pre-holiday hiring, for example in the retail sector. … We estimate that the unemployment rate declined to 3.7% … Our forecast reflects a solid rise in household employment—striking workers are counted as employed in the household survey—and unchanged labor force participation at 62.8%.”• ADP Report: The ADP employment report showed 113,000 private sector jobs were added in October. This suggests job gains below consensus expectations, however, in general, ADP hasn’t been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM surveys are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM® manufacturing employment index decreased in October to 46.8%, down from 51.2% the previous month. This would suggest about 35,000 jobs lost in manufacturing. The ADP report indicated 3,000 manufacturing jobs gained in October.

The ISM® services employment index will be released tomorrow.

• Unemployment Claims: The weekly claims report showed about the same number of initial unemployment claims during the reference week (includes the 12th of the month) from 202,000 in September to 200,000 in October. This suggests about the same number of layoffs in October as in September.

• COVID: As far as the pandemic, the number of patients hospitalized during the reference week in October was around 14,000, down from 16,000 in September.

• Strikes: The CES strike report showed a total of 48,100 workers on strike in October, 30,400 new (mostly UAW), and no strikers that returned to work for the October reference period (contains the 12th of the month). This will reduce employment by about 30 thousand in October.

• Conclusion: Most of the key indicators suggest another solid employment report in October. We’ve seen an upside surprise in employment almost every month, however someday we will see a downside surprise. My guess is the headline number will be close to the consensus.