Event though all eyes are in the elections development, in terms of data the focus turns to the October nonfarm payroll report that are due tomorrow. The October nonfarm payroll are peg gain at 750k, as most measures of output extended their rebounds in October. Initial claims have slowly tightened, and we saw another big -4,991k continuing claims plunge between the September and October BLS survey weeks.
Today the initial jobless claims fell -7k to 751k in the week ended October 31, after the -39k decline to 758k in the prior week. That brought the 4-week moving average to 787.0k versus 791.0 previously. Claims not seasonally adjusted slipped -0.5k to 738.2k following the -27.8k to 738.7k. Continuing claims contracted -538k to 7,285k in the October 24 week versus the -649k drop to 7,823k.
The 750k nonfarm payroll forecast assumes a 910k private jobs increase. The goods based employment increase is pegged at 110k, after a 93k increase in September. Construction employment is seen rising 50k, after a 26k increase in September and a 17k increase in August, while factory jobs rise 55k, after a 66k September increase and a 36k increase in August. We assume a private service job increase of 800k in October, after a 784k increase in September. We expect a further -160k government employment decline due to a -148k drop in temporary Census jobs and continued weakness in education employment.
Hourly Earnings
October average hourly earnings expected at 0.1% after gains of 0.1% in September, and 0.3% in August, but drops of -1.3% in June and -1.1% in May, as we further unwind the 4.7% April surge. Job losses have been skewed toward lower paid retail, leisure and hospitality workers, and this prompted the April spike in average hourly earnings that is now being reversed. We expect a 4.4% y/y increase in October from 4.7% in September, 4.6% in August, and 4.6% in July. Growth in hourly earnings was gradually climbing from the 2% trough area between 2010 and 2014 to the 3%+ area until the economy’s plunge in March. As shutdown distortions dissipate, the underlying cyclical uptrend will presumably fall back to the 2% area, though y/y gains will be distorted through 2021 via the comparison effects from year’s Q2 wage spike and ensuing unwind.
ADP Survey
October ADAP number was out yesterday presenting a 365k rise that undershot the 910k private BLS payroll estimate with a 750k total BLS payroll gain, following a slight boost in the September ADP rise to 753k from 749k that narrowed the gap to the 877k BLS private payroll increase in that month due to back-fitting. The ADP gains since the pandemic began have massively undershot improvement in BLS payrolls and other labor market indicators and hence there was a wide assumption that this this pattern could continue through October, though the data suggest some modest downside October payroll risk.
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Andria Pichidi
Market Analyst
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