Employment reports this week started on Wednesday and with ADP report, which was better than expected, and confirmed that the labor market is healthy. ADP Nonfarm Employment Change in September at 208K, was much better than 200K estimates and 185K in August.
Expectations are different with weekly reports
On Thursday, the September report showed that the number of layoffs by challenger companies in the United States reached 29,989, which was higher than the previous month at 20,485. The highest number of layoffs was seen at 32,517 in June this year. However, current levels are still much lower than usual numbers. Remember that during the pandemic, the figure peaked even up to 671,129. While indicating a softening of labor market growth, this report confirms that the labor market is still growing well.
The weekly initial jobless report also, which publishing on Thursdays, for the week ended October 1, showed that the number of initial claims for unemployment benefits recorded 219,000, exceeding market expectations of 203,000 and the previous month at 190,000 (193,000 before revision). With this number, the four-week average raised to 206,500, while the previous value was revised down to 206,250 (previously 207,000). Again, despite the slight increase in data, the overall level remains at historically low levels. Therefore, we can again say that the labor market is still at a healthy level. Also, should remember that last week’s initial jobless claims, do not affect this NFP report and will be calculated in the October report.
And now, the market focus on Friday will be on the US non-farm payrolls after the September seasonal adjustment. The consensus estimate is 250,000, less than 315,000 in August, and the unemployment rate is expected to stay unchanged at 3.7% or even can decrease to 36% if the participation rate also does not change to 62.4%; As previous months also mentioned, in the NFP report, we have to watch the monthly and annual average hourly wages will is expected to stay unchanged at 0.3% in September, but to decrease to 5.1% in the annual scale, down from 5.2% in August.
And at the end, since Fed’s focus is on inflation and it is so high, while the expected employment report also confirms the healthy condition of the labor market, I do not think that today’s non-farm payroll report can change the Fed’s policy. Therefore, even in the case of negative reports and short-term reactions, it cannot change the market direction at the moment, while an upbeat report will increase the pressures on the stock markets.