Synopsis:

CIBC notes significant noise in October’s jobs report, with factors like hurricanes and strikes leading to a modest 12k increase in payrolls, well below expectations. The Fed is expected to overlook this report's distortions, focusing instead on the broader trend of a cooling labor market as it considers a 25bps rate cut at the November FOMC meeting.

Key Points:

• Job Growth Impacted: October payrolls rose by only 12k, far below the consensus of 100k, due to 44k workers on strike and downward revisions of 112k for prior months.
• Wage Growth and Composition Distortion: Average hourly earnings rose 0.4% m/m, slightly above consensus, likely influenced by compositional shifts in hiring.
• Unchanged Unemployment Rate: The unemployment rate held steady at 4.1%, with a slight dip in the participation rate to 62.6%.
• Fed’s Focus on Trends: Despite temporary disruptions, the Fed will focus on the pre-October trend, which indicates a cooling job market, reinforcing the case for a 25bps rate cut.

Conclusion:

CIBC believes the Fed will look past the October jobs report’s temporary factors and focus on the steady cooling trend seen through September. This aligns with expectations for a 25bps cut at the upcoming FOMC meeting as the Fed monitors broader labor market dynamics.