BofA: What we expect from the US jobs report on Friday

Bank of America forecasts a 100k increase in October nonfarm payrolls, affected by Hurricane Milton and the Boeing strike, with average hourly earnings growth rising to 0.5% m/m. Despite potential data distortions, BofA expects the Fed to proceed with a 25bps cut at next week’s FOMC meeting.

Key Points:

• Nonfarm payrolls projected to increase by 100k, down from 254k in September; hurricane and strike effects likely reduced job gains and hours worked.
• Average hourly earnings growth is expected to rise to 0.5% m/m, partly due to fewer hours worked from weather-related disruptions.
• Unemployment rate forecasted to tick up to 4.2%, partly reflecting hurricane impacts.
• BofA maintains a base case of a 25bps Fed cut in November, with recent Fed communication and market pricing (90%+ chance) supporting this outlook.
• Even with a potential upside surprise in jobs data, BofA believes the Fed will proceed with the rate cut due to the high policy rate level near 5%.

“We expect nonfarm payrolls to rise by 100k in Oct after coming in at 254k in Sep. Although this is below consensus, we’d still view it as a solid print, since we estimate that Hurricane Milton and the Boeing strike temporarily lowered payrolls in Oct. These events also likely lowered hours worked and, as a result, raised average hourly earnings growth to 0.5% m/m. Meanwhile, the [unemployment rate] should move back up to 4.2%, in part due to hurricane distortions.”

Conclusion:

BofA anticipates a “noisy” October jobs report, with payroll gains tempered by temporary factors. However, the Fed appears set for a 25bps cut next week, aligning with market expectations and recent Fed guidance, regardless of minor fluctuations in labor data.

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This article was written by Adam Button at www.forexlive.com.