NFP October Preview – 7th Nov

Markets head into Friday’s US Non-Farm Payrolls report on edge, with the data set to test the Fed’s “soft-landing” narrative after a string of subdued employment readings.

Consensus expects a modest rebound to +55k from September’s meagre +22k, but the tone across leading indicators suggests hiring momentum remains weak heading into Q4.

ISM employment gauges in both manufacturing and services are entrenched below 50. ADP’s latest private-sector print showed only a +42k rise, and job openings continue to trend lower.

Taken together, the mosaic of data points to a labor market that is losing steam rather than stabilizing, a critical inflection for policymakers and USD positioning alike.

Our analysis integrates the latest survey data, claims dynamics, and sector-level employment trends through early November. Our emergent view point argues for a sub-consensus payroll outcome, further validating the view that the US economy has decisively shifted from “resilient” to “cooling.”

Bottom line

• Our Call: +35 – 45k (modal +40k), i.e., a miss vs consensus +55k and in line with a very soft hiring trend.

• Risk skew: Downside (20 – 30k) if government payrolls subtract and recent private-sector softness carries through; limited upside to 60k.

• Revisions risk: Negative (prior “22k” likely to be revised a touch lower, given broad softening across indicators).

Why below 50k:

• ADP private payrolls (Oct): +42k, a weak rebound from 29k in September; historically noisy, but directionally consistent with a very soft official print sub-50k.

• ISM employment is in contraction in both sectors: Manufacturing Employment 46.0 (9th straight month <50) and Services Employment 48.2 (5th straight <50). That combination typically aligns with sub-trend NFP.

• Claims remain elevated vs 2023/24 norms and are being estimated by banks around 219k (week to Oct 25) amid data gaps, consistent with softer payroll creation than consensus.

• Layoffs & hiring plans: September Challenger cuts 54k (cooling from Aug’s spike), but the pace of planned hiring is the weakest since 2009, pointing to a thin gross-hiring pipeline into the autumn.

• JOLTS and broader tone: Job openings have been trending lower into late Q3/early Q4, signaling demand for labor cooling ahead of this report.

Recent Data

• ISM Services (Oct) headline rebounded to 52.4, but the employment sub-index stayed in contraction (48.2), consistent with output holding up while staffing is trimmed/left unfilled.

• ISM Manufacturing (Oct) at 48.7; Employment 46.0, manufacturers continue to pare headcount or replace slowly.

• Private-sector hiring dataflow (ADP, weekly ADP pilot estimates) points to very small net gains, reinforcing a sub-consensus bias.

• Conference Board signals (confidence & ETI) have softened, consistent with slower job creation.

What To Expect Inside The Report

• Private vs Government: Private likely +25–35k; government could be flat to slightly negative given recent headlines and uncertainty, keeping the total near +40k. (Inference based on ADP & ISM employment breadth.)

• Revisions: Soft survey tapestry + recent patterns argue for downward revisions to the already-weak prior +22k. (Direction inferred from multi-series softening; official revision sizes are uncertain.)

Market Implications

• Base case: A 40k print with soft internals should pressure USD initially (especially vs JPY and CHF), support front-end USTs, and favor risk if wages are tame.

• Downside surprise (<25k or a negative revision bundle): Sharper USD selloff, bull-flattening in USTs; risk mixed if recession fears pop.

• Upside tail (>75k): Requires a meaningful government or services surprise; would squeeze USD higher and cheapen the front end, but probabilities look low given surveys.

Our Call Summary

We expect headline NFP at +35 – 45k, a miss versus consensus (+55k) with a downside risk bias to the low-30s range.

The unemployment rate should tick slightly higher, while wage growth likely eases further amid softness in services hiring. The prior +22k print may also face downward revision, compounding a picture of slower job creation.

Conclusion

A print in line with our call would reinforce the narrative that labor-market deceleration is now structural, not transitory, giving the Fed space to lean dovish into year-end.

For markets, a sub-50k outcome should pressure the dollar, bull-flatten the Treasury curve, and support risk assets if wage growth moderates. Conversely, only a material upside surprise above 75k, which current data simply do not support, would challenge that dovish repricing.

TerraBullMarkets