US Nonfarm Payrolls Poised for a Significant Increase! Economic Improvement Following Pandemic Easing; Is Gold Nearing its Bottom?

At 8:30 PM Beijing time on November 5, the US Department of Labor will release the October non-farm employment report. Following two consecutive months of disappointing non-farm data, the number of new jobs in this report is expected to rebound significantly. Although the Federal Reserve announced a reduction in bond purchases in its recently concluded meeting, it remained tight-lipped about interest rate hikes. However, it is certain that the Fed will wait until "full employment" before raising interest rates, a process closely related to the performance of the non-farm report.

　　Current projections from 25 investment banks show an increase of 474,000 non-farm jobs in October, an unemployment rate of 6.79%, and an average wage increase of 4.92%. This data may be bearish for gold, and investors need to be prepared.

September Non-farm Employment Review

　　Data released by the US Bureau of Labor Statistics shows that, The US added 194,000 seasonally adjusted non-farm jobs in September, compared to an expected increase of 500,000 and a previous increase of 235,000. The September unemployment rate fell to 4.8%, a new low since March 2020, compared to an expected 5.1% and a previous 5.2%. Average hourly earnings in September were 4.6% year-on-year, compared to an expected 4.6% and a previous 4.3%.

The US added only 194,000 non-farm jobs in September, a weaker performance than in August and far below the market's expectation of 500,000. Meanwhile, the unemployment rate hit a new low of 4.8% since the pandemic began. The data shows that the situation of insufficient employment willingness among Americans, leading to weak job growth, has not yet been reversed, despite the end of most federal unemployment benefits that month. Therefore, while job growth is slow, labor shortages are driving up wage inflation, a situation that will likely make the Fed's future policy direction even more difficult.

　　The slowdown in US non-farm job growth in September, coupled with a continued decline in the unemployment rate, is solely due to a further decline in overall labor force participation. Many low-paying, arduous jobs requiring outdoor fieldwork or close contact with customers remain difficult to fill.

　　Bloomberg analyst Olivia Lockman commented on the September non-farm payroll report, stating that several months of sluggish job growth indicate a tug-of-war between employers and job seekers—employers desperately need workers to meet demand, while job seekers are slow to return to the workforce. Despite this, with companies raising wages, schools reopening, and the end of federal unemployment benefits, hiring should increase in the coming months.

　　 October Non-farm Employment Expected to Rebound

　　With the waning of the new wave of the pandemic and economic improvement, hiring is expected to grow steadily, and wages may continue to climb in October.

　　According to Dow Jones data, Economists expect 450,000 jobs were added last month, and the unemployment rate is expected to fall from 4.8% to 4.7%. Hourly wages are expected to increase by 0.4% in October, and 4.9% year-on-year. This is higher than the approximately 4.6% increase in September.

　　Following this week's Fed meeting, economists are closely watching the wage component of the report, which has been rising for several months. The Fed said on Wednesday that it continues to believe inflation is transitory. Economists say that if inflation continues to heat up or become higher, the Fed could quickly take action to raise interest rates. Futures markets are digesting expectations that the Fed will raise interest rates for the first time in July.

　　Grant Thornton chief economist Diane Swonk expects October employment to reach 650,000 , far exceeding the general expectation. She said that not only could inflation and wages become problems for the Fed, but also that several months of consistently strong employment data could alter the Fed's outlook.

　　"By December, they will have two more months of employment data, and if we have two more months of strong employment reports, I wouldn't be surprised if the Fed accelerates tapering in December or January ." she said.

　　FXStreet analyst Joseph Trevisani said the problem in the US labor market clearly isn't coming from employers. There are millions of job openings, and companies are desperate for workers.

　　He believes, rampant consumer inflation may incentivize many workers to return to the workforce.

　　"When gasoline is up nearly 50% in a year and food costs are rising monthly, a steady job may be seen as far more reliable than government handouts," he said.

　　 25 Investment Banks' Outlook: US October Non-farm Employment Expected to Rebound Significantly

　　Predictions from 25 major investment banks show that after the unexpectedly low data in September, non-farm employment in October will increase significantly, but there is a large gap in the expected increase among the banks. Specifically, The seasonally adjusted increase in US non-farm employment in October is expected to be between 350,000 and 675,000, the unemployment rate is expected to be between 6.7% and 7%, and the year-on-year increase in average hourly earnings is expected to be between 4.7% and 5%.

The October non-farm report did not affect the Fed's decision this week, but it will still affect the Fed's future interest rate hike pace. If the October non-farm employment data is stronger than expected, it may enable the Fed to meet the conditions for a rate hike sooner, thus benefiting the US dollar index.

　　 Several Leading Indicators for Non-farm Employment

　　 [US Manufacturing Growth Slows in October, Employment Index Rises to Three-Month High]

　　US manufacturing companies continued to face pressure from supply chain issues in October, with longer supplier delivery times and higher inventory levels.

　　According to data released on Monday, the Institute for Supply Management (ISM) manufacturing index fell to 60.8 from 61.1 in September. Readings above 50 indicate expansion. The median forecast among economists surveyed was 60.5.

　The ISM's supplier delivery index rose to a five-month high, indicating that manufacturers are facing longer lead times for raw materials. Labor shortages, intermittent shutdowns, and record-breaking imports of goods have overwhelmed US ports, delaying deliveries. This has also led to a sharp increase in the inventory index, reaching its highest level since 1984.

　　Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said, "The challenges that businesses and suppliers need to overcome are unprecedented in the face of growing demand."

　　Fiore said: "All areas of manufacturing are affected by record-breaking raw material delivery cycles, persistent shortages of key materials, rising commodity prices, and difficulties in transporting products."

　　 Manufacturers appear to have had some success in increasing staffing, with the employment index rising to 52, a three-month high.

　　 [US October Services PMI rose to a record high, but employment index fell to a four-month low]

　　US service providers expanded at a record pace in October, boosted by strong demand and increased business activity.

　　Data released on Wednesday shows, The Institute for Supply Management (ISM) services index rose from 61.9 in September to 66.7, exceeding all economists' expectations.

New orders and business activity indicators also rose to their highest levels since records began in 1997, indicating that the economy is further building momentum in early Q4 as the COVID-19 pandemic eases.

　　Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement: "Demand shows no signs of slowing, however, persistent challenges (including supply chain disruptions and labor and material shortages) are limiting capacity and impacting overall business conditions."

　　Meanwhile, A decline in the employment index suggests that labor market challenges persist. The index fell to a four-month low of 51.6 in October, indicating that job growth was more moderate despite strong demand.

　　Data from the ADP Research Institute showed that private sector employment increased by 571,000 in October, exceeding expectations, but employment levels remain well below pre-pandemic levels.

　　 [ADP data shows US companies added more jobs than expected]

　　US companies added the most jobs in four months, suggesting employers are making progress in filling near-record job openings.

　　Data released Wednesday by the ADP Research Institute showed, October employment increased by 571,000, revised to 523,000 in September, The median forecast among economists surveyed was an increase of 400,000.

Businesses are desperate to hire as labor shortages continue to hamper production and drive up prices. However, Total employment in the ADP data remains well below pre-pandemic levels, indicating that higher wages and signing bonuses are not enough to attract and retain talent in an increasingly discerning labor market.

　　The Labor Department will release its monthly employment report on Friday, with an expected increase of 408,000 nonfarm jobs in October. While ADP data doesn't always follow the same pattern as Labor Department data, this acceleration may foreshadow a strong October nonfarm employment report.

　　 [Challenger job cuts in the US rose in October]

　　 Challenger job cuts in the US rose from 17,900 in September to 22,800 in October.

　The president of Challenger, a job market data company, said the US remains in a labor market where demand far exceeds supply.

　　The Occupational Safety and Health Administration will introduce a federal vaccine mandate, which already exists for many government employees and contractors, as well as healthcare providers. This complicates hiring and retention efforts.

　　 [Initial jobless claims hit a pandemic low]

　　Initial jobless claims in the US fell to a near 20-month low last week, suggesting the economy is regaining momentum as public health conditions improve significantly, although supplies remain tight.

　　Data released Thursday by the US Department of Labor showed that for the week ending October 30, The number of Americans filing for unemployment benefits for the first time was 269,000. The previous value was 283,000 (revised from 291,000), which is better than the market expectation of 277,000. 。

Initial jobless claims have fallen from a record high of 6,149,000 in early April 2020, currently within the range generally considered consistent with a healthy labor market. 。

　　Continuing jobless claims fell by 134,000 to 2.105 million for the week ending October 23. This is also the lowest level since mid-March 2020. The number of people receiving benefits has fallen by about 75% since government-funded benefits expired in early September.

　　The decline in initial jobless claims is a good sign for the October employment report, due to be released on Friday. According to a Reuters poll of economists, nonfarm payrolls are expected to increase by 450,000.

　　 Institutional Views

　　 Wells Fargo: Expects an increase of 390,000 nonfarm payrolls in October.

　　The US ISM non-manufacturing PMI data released on Wednesday hit a record high. Economic activity has never been so rapid, demand shows no signs of slowing, and prices show no signs of falling. The main challenge facing the labor market recovery remains the supply of labor. In the past month, the factors hindering workers from seeking jobs have not disappeared, but many influencing factors have eased as the number of people not looking for work due to concerns about COVID-19 and childcare has decreased. Recently, with significant wage increases, the expiration of additional unemployment benefit programs should incentivize workers to return to the labor market. Therefore, we expect an increase of 390,000 nonfarm payrolls in October.

　　 Bank of America: Expects 450,000 increase in nonfarm payrolls in October;

　　① Bank of America expects an additional 450,000 jobs in October and predicts that the pace of hiring will remain high for some time, as growth is expected to improve;

　　② Alex Lin, US economist at Bank of America, said: "We believe that a large limiting factor that has slowed the job market in recent months is related to COVID-19, and now it seems that cases and hospitalizations are moving in the right direction."

　　③ Lin expects: "Restaurants, hotels, and retailers will be areas that add a significant number of workers. We generally expect stronger wage growth in the future."