Synopsis:

Credit Agricole anticipates a substantial jump in nonfarm payrolls (+240k) in November, driven by the reversal of October’s temporary drags from hurricanes and strikes. However, they recommend interpreting the data with caution, averaging recent months for a more accurate trend.

Key Points:

• Payroll Expectations:

  • November nonfarm payrolls forecast: +240k (vs. +12k in October).
  • Temporary boosts from the return of hurricane- and strike-affected workers.
  • Averaging October and November suggests a two-month trend of +125k/month.

• Wages and Unemployment:

  • Average hourly earnings: Expected to rise by 0.3% MoM, slightly lower than September’s 0.4%.
  • Year-over-year wage growth: Likely to tick down to 3.9% from 4.0%.
  • Unemployment rate: Forecast to edge up to 4.2% (from 4.1%), reflecting more stable household survey data.

• Fed Implications:

  • Temporary distortions in the data could complicate Federal Reserve interpretations.
  • A report aligned with expectations supports one more rate cut in December, followed by a pause in January.
  • A stronger-than-expected report could increase the likelihood of a pause in December.

Conclusion:

While the November jobs report is expected to look strong on the surface, Credit Agricole emphasizes the need to focus on broader trends due to temporary factors. The data should keep the Fed on course for a December rate cut unless significant surprises emerge.