Due to the storm and strikes, recruitment in October is basically in a slump, and the employment report scheduled to be released on Friday may provide a clearer picture of the direction of the labor market in November.

It is expected that the US Bureau of Labor Statistics will announce a 214000 increase in non farm employment in November, a significant increase from 12000 in October. The October data is the worst since December 2020.

One of the reasons why this report is so important is that it will be the Fed's final comprehensive review before its next policy meeting on December 17-18. The market is heavily betting that the Federal Reserve will approve another 25 basis point rate cut, but this may depend on the performance of employment data.

Kathy Jones, Chief Fixed Income Strategist at the Jiaxin Wealth Management Financial Research Center, said, "Well, this should be a fairly healthy number as it should have rebounded from the job losses caused by hurricanes and strikes in October

In fact, after investigators from the US Bureau of Labor Statistics re-examine the data for October, the data may be pushed higher. In the post pandemic era, revisions to employment reports can sometimes be significant.

This may cause confusion in the economic data for the coming months and make the work of the Federal Reserve more challenging.

Jones said, "I expect it to exceed 200000, and if the economy really rebounds, it may rise. But I'm not sure how much this employment report will tell us, because the impact of weather is up and down. Will it really give us a clear understanding of the future, or is it just more vague data to be processed

The Importance of the Federal Reserve

At a time when the annual inflation rate is high but easing, and the labor market is receiving more attention, it is crucial for the Federal Reserve to obtain a clear picture as policymakers seek to readjust policies.

Except for the October report, the employment situation has been showing a slowing trend since around April, with an average of about 128000 new jobs added per month, and the unemployment rate has risen to 4.1%. Federal Reserve policymakers hope to lower the benchmark short-term borrowing rate to a more neutral level to balance concerns about inflation and employment.

Vincent Reinhart, an economist at Bank of New York, said, "This will definitely be noisy because storms and strikes will affect two months of data, namely the month when people are not working and the month when they return to work next month." He is a former Federal Reserve official who has been in office for 24 years.

He added, "The Federal Reserve believes that the slowdown in non farm employment during 2024 is basically forming a trend, creating just over 100000 job opportunities per month, which is not worrying. This is actually welcome because, you know, the trend is sustainable

In fact, recent signals indicate that the job market is stabilizing, but not deteriorating.

The labor market situation is receiving more attention from the Federal Reserve

The number of initial jobless claims per week has remained stable at around 220000, but in early November, the number of renewed jobless claims reached its highest level in about three years. In summary, these numbers indicate that the company has not implemented large-scale layoffs, but has also not rehired those who lost their jobs.

The Federal Reserve released an economic report on Wednesday (the "brown book" summarizing the current situation), which stated that with employee turnover still low and almost no companies reporting an increase in employee numbers, recruitment activities are sluggish. The report states that layoffs are "very low," but employers are cautious about the pace of future recruitment and are more enthusiastic about entry-level employees and skilled workers.

The data released by the US Bureau of Labor Statistics this week shows that job vacancies increased in October, while employment rates decreased and the number of voluntary resignations increased.

When making interest rate decisions and outlining future prospects, the Federal Reserve must weigh all these factors, along with concerns about rising inflation.

Reinhart stated that if the labor market can remain stable, it will not bring additional pressure to inflation. He added, "So our strategy is to strive to align demand with trends, because if growth and demand align with trends, then you should maintain the current state of the labor market, which is roughly in equilibrium

In addition to an overall increase in employment, it is expected that the unemployment rate will rise to 4.2% as the labor force resumes employment from October. In addition, it is expected that the average hourly wage will increase by 0.3% month on month and 3.9% year-on-year, both of which have slightly decreased compared to the previous month.

How does it affect the Federal Reserve's interest rate decisions?

If the November report shows weaker than expected employment growth, a slight increase in unemployment rate, and wage increases that are consistent with or lower than expectations, then the expectation of a December interest rate cut may become even more firm.

In this situation, policy makers may view the cooling of the labor market and slowing wage growth as evidence that inflationary pressures are easing, paving the way for easing monetary policy.

On the other hand, the significant increase in employment in November, coupled with stronger than expected wage growth, may force traders to readjust their bets. A hot job report will indicate that the labor market is resilient and tight, which may reduce the urgency of the Federal Reserve's interest rate cuts and increase the likelihood of suspending them.