Friday's non-farm payroll report is not simple!

The U.S. non-farm payroll report to be released this Friday is the last employment market report before the Federal Reserve's policy meeting next week, but this data will be difficult to interpret. Floods and power outages caused by hurricanes "Helena" and "Milton" have paralyzed the operations of many businesses, which could affect the employment numbers in October. In addition, the U.S. Bureau of Labor Statistics stated last week that as of October 12th (covering the survey week), 44,000 workers were on strike, with the majority working at Boeing. In short, the forecasted median increase of 110,000 jobs in October is one of the smallest since the end of 2020, less than half of the September increase. A survey of economists shows a significant difference in forecasts for October employment numbers, ranging from a decrease of 10,000 to an increase of 180,000. At this time, with the final sprint of the presidential election, it is unclear how American voters will interpret these warning-laden data. However, a lackluster report could become additional material for former President Trump and Republicans, who have fiercely criticized Democratic Vice President Harris on economic issues. As inflation is essentially trending towards the Fed's target, officials are now more focused on the gradually cooling labor market. Mark Zandi, Chief Economist at Moody's, said policymakers will calmly respond to these data and continue to focus on lowering interest rates, as the current rate levels are widely believed to have a dampening effect on the economy. Zandi said, "It would take a very surprising employment or inflation data for them to abandon this policy. At this point, the threshold for them to not implement the rate cuts they have outlined to the market is quite high." Fed Governor Waller said earlier this month that the employment report is "not easy to interpret," but he expects hurricanes and the Boeing strike to reduce job growth by over 100,000. The Fed has entered a pre-meeting blackout period, with an expected 25 basis point rate cut at this meeting. Hurricane "Helena" made landfall on September 26th, while "Milton" made landfall on October 9th - precisely the week the U.S. Bureau of Labor Statistics surveys businesses to compile non-farm data. However, according to Goldman Sachs' Ronnie Walker, the data during the survey week may not have a significant impact on October non-farm numbers. The employment report consists of two surveys, one for households and one for businesses. Each survey has different standards for measuring employment. According to the survey of businesses, severe weather must cause employees to stop working and stop receiving pay for the entire pay period, including the 12th, in order to result in a decrease in non-farm employment. Even if employees technically still have work, they will not be counted as employed. However, the household survey used to calculate the unemployment rate does not exclude these individuals. The household survey also reports the number of people who have jobs but did not work due to weather reasons, so economists and Fed officials may rely more on this dataset According to Bloomberg's survey of economists, the unemployment rate is expected to remain at 4.1%. Regardless of the final outcome, the U.S. Bureau of Labor Statistics often comments on the impact of storms on data, and state-level data to be released two weeks later will show the effects in storm-hit areas such as North Carolina, Florida, and others, helping to further clarify the data. Bloomberg Economics economists believe: "We expect the October U.S. non-farm payroll report to show the first negative employment data since December 2020... Much of the weakness is weather-related disruptions, but we also see a slowdown in cyclical industries. Excluding transitory factors and adjusting for exaggerated sources, basic employment growth may fall below the pace needed for stable unemployment rates." In addition to the impact on the job market, hurricanes may have also dampened overall economic growth in the early fourth quarter. Goldman Sachs' Walker said that in the month of a natural disaster and the following month, economic growth typically cools off before rebounding. He said: "Hurricane Helena is the deadliest hurricane since Hurricane Katrina, with nearly 10% of the U.S. population included in major disaster declarations, estimated to have caused total material losses of around $90 billion, although this is still very uncertain." Goldman Sachs expects that due to the impact on industrial production, retail sales, and construction, GDP for this quarter will decline by 0.3 percentage points, followed by a similar rebound in early 2025. With strong consumer and business spending driving force, the government will release the first estimate of third-quarter GDP on Wednesday, with an annualized growth rate expected to reach 3%, matching the growth of the previous quarter. Another set of data released on Tuesday showed that job vacancies in September fell to the lowest level since early 2021 - when most of the impact from the two hurricanes had not yet been felt, with layoffs increasing in that month