At 20:30 Beijing time, the United States will release the October non-farm payrolls report. The market expects that strong hurricanes and major labor strikes may lead to a sharp decline in the number of new jobs in October, the slowest month of employment growth in nearly four years, but the unemployment rate will remain stable.

According to a survey of economists by foreign media, non-farm payrolls may have increased by 113,000 in October, compared with an increase of 254,000 in September. Wall Street banks have a wide range of expectations for this data, ranging from a decrease of 10,000 to an increase of 180,000, while the unemployment rate is expected to remain unchanged at 4.1%.

Michael Arone, Chief Investment Strategist at State Street Global Advisors, said, 'The unemployment rate will remain low, and I think wage growth will outpace inflation, both of which will emphasize the health of the U.S. economy.'

In terms of wages, average hourly wages are expected to grow by 0.3% month-on-month and 4% year-on-year, with the annual growth rate remaining the same as in September, further indicating that inflation remains sticky but is not accelerating.

These numbers will make it more complicated for Fed officials to try to assess the labor market outlook at the policy meeting on November 6-7. However, following a 50 basis point cut in September, the market still expects the Fed to lower rates by 25 basis points at the November meeting.

Regardless of the outcome, the market may choose to ignore this report, as many one-time shocks have suppressed hiring. Skanda Amarnath, Executive Director of the U.S. Employment Association, said in a statement on the outlook data released on October 30, 'Federal Reserve officials are more likely to 'ignore' the negative impacts related to the hurricanes and only respond when wage growth is strong.'

Arone added, 'The overall numbers may be a bit noisy, but I believe there will be enough evidence to continue demonstrating that a soft landing is still ongoing and that the U.S. economy remains in good shape.'

Will tonight's non-farm data be 'distorted'?

Before the highly anticipated employment report is released, leading indicators show that, despite losses caused by storms and strikes, hiring is continuing and layoffs remain low.

This week, payroll processing company ADP reported that private sector employers hired 233,000 new workers in October, far exceeding expectations, while initial claims for unemployment benefits fell to 216,000, matching the lowest level since late April.

Nevertheless, the White House estimates that these events may have reduced employment by as much as 100,000. Council of Economic Advisers Chairman Bernstein said on Wednesday, 'These disruptions will make interpreting this month's employment report more difficult than usual.'

The increase of 113,000 in non-farm payrolls would mark the worst month for hiring in nearly four years, although many forecasters have accounted for the temporary impacts of Hurricane Helen and Milton, as well as Boeing's weeks-long strike.

In October, the losses caused by hurricanes in the U.S. may reach a historical high, while the Boeing strike has left 33,000 workers idle. The Bureau of Labor Statistics estimates that during the week in which companies were surveyed, 44,000 workers participated in large strikes, compared to only 2,600 in September.

Goldman Sachs estimates that Hurricane Helen reduced employment by 50,000 jobs, but Hurricane Milton occurred too late to have impacted the October statistics. Goldman added that, meanwhile, the Boeing strike could reduce the total by 41,000, and Goldman expects total employment to increase by only 95,000.

Bank of America economist Shruti Mishra stated in a report on October 30 that the hurricanes 'may have had a negative impact on job growth across various sectors, especially the leisure and hospitality industries.' The economist stated that, overall, the storms and strikes could lead to a reduction of at least 50,000 in last month's job growth, while temporary hiring ahead of the November 5 presidential election could increase government employment by 25,000.

In this regard, analysts may focus more on the unemployment rate, which is considered less affected by the storms and strikes. The labor force participation rate, derived from the same household survey as the unemployment rate, is expected to remain flat at September's 62.7%.

The unemployment rate rose from last year's low of 3.4% to 4.3% in July, and then gradually declined over the next two months. Economists generally believe that the influx of large numbers of migrants at the southern border is one reason for the rise in the unemployment rate, but the number of border crossings has declined in recent months.

Goldman Sachs economists Ronnie Walker and Jessica Rindels said in a report released on October 31, 'The slowdown in labor force growth, partially reflecting a slowdown in immigrant contributions, should allow new entrants to the labor market to gradually find jobs, thereby exerting downward pressure on the unemployment rate for this group.'

Additionally, many analysts believe that the hurricanes could lead to reduced hours of work and temporarily boost hourly wages. However, following strong wage growth in August and September, economists still expect wage growth to slow in October. The market expects the average hourly wage growth rate to slow to 0.3%, keeping the 12-month growth rate at 4%.

Citigroup economists Veronica Clark and Andrew Hollenhorst said in a report released on October 28, 'If wage growth continues to be strong, it could be a concerning sign of inflationary pressure, but ultimately, we believe the weakness in the labor market is exerting downward pressure on wages.'

The Fed's interest rate cut path may not change.

Considering the expected distortions, some economists believe that Friday's non-farm report will not significantly impact the Fed officials' views on the health of the labor market.

Jefferies U.S. economist Thomas Simons stated, 'One thing Powell has been quite adamant about is that we should rely on data, but not on one or two pieces of data, so if we do get a weak jobs number or a rise in the unemployment rate, I think they will take note of that.'

Overall, recent data outside of the non-farm employment report shows that the labor market is gradually cooling. The Bureau of Labor Statistics reported on Tuesday that job openings fell to the lowest level since January 2021 in September. Meanwhile, the resignation rate, which is a sign of worker confidence, fell from a revised 2% in August to 1.9% in September.

Wells Fargo senior economist Sarah House wrote in a research report, 'We believe that monetary policymakers are focused on the broader trend of significant cooling in the job market over the past year, which, while not weak in absolute terms, is in many ways softer than before the pandemic.'

Is the rise of gold hard to conclude?

Gold faced strong selling pressure during Thursday's U.S. trading session, quickly retreating from historical highs to around 2731 before rebounding. ANZ Research analysts stated in a report that the drop in gold prices resulted from investors taking profits after a strong rally over the past month. The analysts added that the overall strong economic data from the U.S. supports a more cautious view on the Fed's interest rate cut trajectory in the coming months, as investors will focus on today's U.S. October employment report and PMI data to further assess the Fed's next steps.

FXStreet analysts point out that, from a technical perspective, overnight gold has given back most of the gains made earlier in the week, with daily charts showing that corrective declines may continue, but it is far from bearish territory. After last night's rapid pullback, technical indicators have moved out of the overbought zone and are trending downward above the neutral range. However, gold prices still remain above all cycle moving averages, maintaining a bullish trend. The 20-day SMA is currently around 2696.00, providing dynamic support for gold.

However, from a 4-hour perspective, gold's risk is tilted to the downside, as the price has dropped below the 20-day SMA and lost short-term bullish momentum around 2766.00. Only the 100-day and 200-day SMAs remain steadily rising and far from the current price. Technical indicators show that it has fallen below the neutral range and maintains a sharp downward trend.

Marex analyst Edward Meir stated, 'Investors remain in a buy-the-dip mentality, a strategy that will likely continue during the U.S. election period and perhaps beyond, as there will be a lot of turmoil. With no signs of recession and declining inflation, the economy looks positive... The key now is how quickly the Fed will cut rates.'

Article shared from: Jin Ten Data