NFP Preview: How Could the Jobs Report Impact the US Election and the Fed?

NFP Key Points

• NFP report expectations: +108K jobs, +0.3% m/m earnings, unemployment at 4.1%
• Coming in the lead up to a tightly-contested Presidential election, this month’s jobs report could have an outsized impact on sentiment.
• DXY is overbought near multi-month highs - the technical outlook suggests elevated pullback potential if the jobs report is soft.

When is the October NFP Report?

The October NFP report will be released on Friday, November 1, at 8:30 ET.

NFP Report Expectations

Traders and economists expect the NFP report to show that the US created 108K net new jobs, with average hourly earnings rising 0.3% m/m (4.0% y/y) and the U3 unemployment rate ticking holding steady at 4.1%.

NFP Overview

The US labor market has defied expectations by improving in latter half of the year thus far, with last month’s NFP report coming in at 254K, the highest reading in six months and more in-line with the strong readings that we saw in the first quarter of 2024. Heading into this month’s NFP reading, traders are once again anticipating a downshift in job creation:

Source: StoneX

As the lower left box below suggests, the Fed is still likely to cut interest rates by 25bps in each of its next two meetings to finish the year, but another stronger-than-expected jobs report could call the anticipated December rate cut into question. Coming as it will in the week before a tightly-contested Presidential election, this month’s jobs report could have an outsized impact on sentiment and may even tip the scales for which candidate a small number of swing voters may select.

NFP Forecast

As regular readers know, we focus on four historically reliable leading indicators to help handicap each month’s NFP report, but given the vagaries of the calendar this month, we only have access to two of them before the jobs report:

• The ADP Employment report showed 233K net new jobs, an increase from last month’s upwardly-revised 159K reading.
• The 4-week moving average of initial unemployment claims rose to 236K, up from 224K last month.

Unfortunately, the post-NFP release schedule for the PMI surveys means that any specific forecast would be too imprecise for this month. As always, the other aspects of the report, prominently including the closely-watched average hourly earnings figure which came in at 0.4% m/m in the most recent NFP report.

Potential NFP Market Reaction

	Wages < 0.2% m/m	Wages 0.2-0.4% m/m	Wages > 0.4% m/m
< 80K jobs	Bearish USD	Slightly Bearish USD	Slightly Bearish USD
80K-140K jobs	Slightly Bearish USD	Neutral USD	Slightly Bullish USD
> 140K jobs	Neutral USD	Slightly Bullish USD	Bullish USD

As we outline below, the US dollar sits near multi-month highs after a strong rally through October. With the world’s reserve currency potentially losing steam and overbought across longer timeframes, there’s an argument for skewing the balance of risks slightly to the downside, especially if headline job creation misses expectations.

US Dollar Technical Analysis – DXY Daily Chart

Source: TradingView, StoneX

The US Dollar Index rose more than 300 pips, or around 3%, in a straight-line rally through the first three weeks of October before finally taking a breather this week. With DXY still near multi-month highs and the 14-day RSI showing signs of a rolling over, the technical outlook suggests elevated pullback potential.

If we do see another strong jobs reading, DXY could retest the weekly highs near 104.50, whereas a soft reading could cement expectations for two 25bps rate cuts from the Fed this year and open the door for a deeper retracement toward 103.00.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX