A weather-distorted October jobs report recalls a key truth about economic data: Morning Brief

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The October jobs report is slated for release on Friday, less than a week before the Federal Reserve will announce its next interest rate decision.

After the Fed’s half-percentage-point interest rate cut in September, other economic data has been stronger than expected, including the labor report released on Oct. 4. This would typically push the upcoming jobs report front and center to help settle the debate over whether months of cooling data, or the resurgence seen in September’s report, is the best read on the health of the jobs market right now.

Instead, investors may be struggling for any clear answers at all.

After 254,000 nonfarm payroll additions in September, consensus expects the US economy added 110,000 jobs in October. With downside pressure coming from a large strike at Boeing and several hurricanes disrupting collection data, it could prove to be one of the lowest monthly job totals of the year.

But several economists have argued a bad report, which could feature factors like an increase in temporary layoffs due to hurricane disruptions, likely won’t provide much signal for the Fed.

“The distortions to this data make the report difficult to rely on, and we doubt that the Fed will be motivated to change tack on policy based on the tone of the data,” Jefferies’ economics team led by Thomas Simons wrote in a note to clients on Oct. 25. “Similarly, the drag in October will likely be reversed in November, so we doubt we will have a clean look at the payroll data for the next few months.”

Fed officials have questioned the reliability of the upcoming payrolls print too.

“Unfortunately, it won’t be easy to interpret the October jobs report,” Fed governor Christopher Waller said on Oct. 14.

This brings us back to a common truth about economic data. The economic narrative rarely hinges on one print. It really is, as Fed Chair Jerome Powell often says, about the totality of the data. Sure, something like a surprise uptick in the unemployment rate, as seen in July, can shift the narrative quickly. But those recession fears were just as quickly unwound as more data flowed in.

When asked about weather impacting the upcoming jobs report during an event at NYU on Oct. 15, San Francisco Fed president Mary Daly noted that the jobs report is just one of “many inputs” she considers when assessing the state of the labor market.

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