October/November Employment Preview

The labor data printing tomorrow has been a long time coming. The October payrolls number was originally scheduled to be released November 7 and the November data was supposed to come out December 5, with both being delayed from the government shutdown earlier this quarter. Though much anticipated, we think that absent an extreme outcome, this print will not be decisive for the Fed meeting in January. As Fed Chair Powell suggested at last week’s FOMC meeting, the Fed will look at the October and November data releases with “somewhat of a skeptical eye” due to the incomplete collection of data and technical distortions. In addition, even though the Bureau of Labor Statistics extended the collection period for data, the response rate was lower than normal and thus subject to larger than usual revisions. Fed policymakers knew there was the possibility of weak October and November numbers due to the shutdown effect, government workers rolling off the payrolls (the DOGE effect), and slowing labor demand, so soft data shouldn’t be too concerning as long as the weakness is within reason. December’s numbers (coming out January 9) will be relatively clean – free of DOGE and shutdown distortions – and will be more instructive about what the Fed will do next. Even though key policymakers are still primarily concerned with the labor market, a softer CPI on Thursday will also lower the threshold about what constitutes labor weakness.