Here’s what to watch in Friday’s big October jobs report

Apologies if you’ve heard this one before, but the jobs market is slowing down. No, really.

Aside from the long-standing calls for a recession to hit the U.S., the expectation for a hiring retreat is probably the most oft-heard — and, so far, incorrect — economic call of at least the last year.

True to form, the consensus Wall Street call is that the October nonfarm payrolls report, which the Labor Department is scheduled to release Friday at 8:30 a.m. ET, will show a sharp decline from September. Economists surveyed by Dow Jones are expecting growth of just 170,000, down from the shockingly high 336,000 the previous month and well below the 260,000 monthly average so far in 2023.

Don’t hold your breath looking for that big of a decline, said Amy Glaser, senior vice president at global staffing firm Adecco.

“This is going to be another surprising month. We’re still seeing resilience in the market,” Glaser said. “We’re still seeing a ton of positivity on the ground with our clients.”

Though long-standing trends such as aggressive job switching and big wage gains now show signs of reversing, hiring is still strong as employers look for incentives such as flexible work scheduling to bring in new talent, she added.

“Folks aren’t able to jump from one job to another and gain these huge, astronomical pay increases, which is good news for the employers,” Glaser said. “On the flip side, we’re seeing a return of the workforce … The folks coming off the bench are really going to make an impact over the upcoming months.”

Trends in labor force participation will be one metric worth watching closely when the report hits, as the participation rate is still half a percentage point below its pre-pandemic level. Here are a few more:

Average hourly earnings

Wages increased 4.2% from a year ago in September. That is expected to decrease to 4% for October. The earnings picture is an important component to inflation, and one policymakers will be viewing with a careful eye.

The Dow Jones estimate is for a 0.3% monthly gain, after rising 0.2% in September. Federal Reserve officials have said they don’t think wages have been the key driver of inflation, though Chair Jerome Powell said Wednesday that the labor market could emerge as a more significant factor ahead.

Full-time vs. part-time

“In recent months, firms are hiring relatively more part-timers, indicative of the uncertainty in near-term business conditions,” said Jeffrey Roach, chief economist at LPL Financial.

Indeed, a potentially important trend has been the hiring of part-time workers in recent months. Since June, their rolls have swelled by 1.16 million, according to Labor Department data. Conversely, full-time positions have dropped by 692,000.

“Employers are creating more part-time opportunities that are bringing in players off the bench,” Glaser said. “There’s still a bit of caution on the side of employers, and they’re choosing to open part-time roles in this wait-and-see mentality.”

The unemployment rate

While the rise in the jobless rate over past months has generally flown under the radar considering how historically low it is, the level actually is approaching a potential danger zone.

An economic premise known as Sahm’s Rule states that recessions happen when the unemployment rate’s three-month average runs half a percentage point above its 12-month low. The current rate of 3.8% is 0.4 percentage point above the recent low last seen in April.

“Most investors expect additional deterioration in the job market before we see a meaningful deceleration of inflation,” Roach said.

Strike impact

Close to half a million American workers have gone on strike in recent months. While a number of those high-profile stoppages have been resolved, some of the activity will show up in the October jobs report.

Specifically, the Bureau of Labor Statistics is estimating that about 30,000 striking United Auto Workers will subtract from last month’s count, posing potential downside risks for the report.

Homebase, which compiles widely watched high-frequency data on employment trends, said the jobs market generally is turning lower.

The firm’s database indicates that employees working declined 2.4% in October, computed on a seven-day average using January as the baseline. Hours worked, another important metric, fell 2%, Homebase said.

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