Don’t Expect September Jobs Report to Be Decisive for Fed’s November Move: BofA

Bank of America analysts downplayed the importance of the forthcoming September jobs report in assessing the Federal Reserve’s potential actions in November. In their recent “Labor Market Watch” note, they suggested that while the report could provide some insights into the labor market, it is unlikely to be a key determinant in the Fed’s decision regarding interest rate adjustments this year.

BofA anticipates that nonfarm payrolls will see an increase of 150,000 in September, a slight rise from the 142,000 recorded in August. They predict that public sector hiring will grow by 20,000, primarily due to local government employment, while private payrolls are expected to rise by 130,000.

The analysts emphasized that the health, education, and government sectors are expected to continue driving payroll growth, although these areas are beginning to show signs of slowing down as they align with pre-pandemic trends. Despite the positive payroll projections, BofA expects the unemployment rate to hold steady at 4.2%, attributed to low levels of layoffs and a slightly declining labor force participation rate.

This expected stability in the unemployment rate is said to be consistent with modest hiring in sectors like education and healthcare, coupled with minimal layoffs across various industries. Even if the September jobs report surpasses expectations, BofA analysts remain skeptical that it would compel the Fed towards another rate hike.

They noted, “A stronger-than-expected September jobs report would likely influence market pricing towards a 25 basis point cut in November instead of 50 basis points. However, we do not believe this report will be pivotal for the Fed’s November decision,” citing the relevance of other metrics, such as September inflation data and the October jobs report, in guiding the Fed’s final choice.

In conclusion, BofA stated: “We do not think the September jobs report will be decisive for the Fed’s November move. Several additional data points, including the inflation figures for September and the jobs report for October, will still be released before the November meeting.”