What We Know About the Unusual Mid-Month Payrolls on Tuesday

In a week packed with important economic data, Tuesday’s U.S. labor market report will be in focus for investors.

According to the median forecast in a Bloomberg survey, nonfarm payrolls are expected to increase by around 50,000 in November. The unemployment rate is seen rising to 4.5%, continuing its upward trend from recent months and reaching its highest level since 2021.

The data will provide a long-awaited snapshot of the state of the U.S. labor market and help shape expectations for interest rate policy in the year ahead. However, this report will not be typical, as the government shutdown adds additional uncertainty and specific distortions to the statistics.

What the report will include
In addition to November employment figures, the report will also include key indicators from the monthly household survey, including the unemployment rate. The Bureau of Labor Statistics has extended the data collection period to ensure more complete information following the government shutdown.

By contrast, the agency will not publish unemployment figures for October, as it was unable to collect the data retroactively. The October employment report was canceled, with job data expected to be released together with the November figures. Because many companies store their records electronically, the Bureau of Labor Statistics was still able to gather data on employment levels.

Employment data
Employment indicators have been highly volatile in recent months—swinging between declines and solid growth—and similar dynamics are likely to persist on Tuesday. After stronger-than-expected job growth in September, some economists expect a negative reading for October, as tens of thousands of federal employees who accepted deferred resignation programs dropped off payrolls after September 30.

According to the Office of Personnel Management, around 144,000 people took advantage of this option. Economists at Goldman Sachs estimate this will reduce employment by about 70,000 in October and by a further 10,000 in November.

Even so, most analysts expect November employment data to remain positive. Forecasts span a wide range—from a decline of 20,000 to an increase of 127,000 jobs. Oxford Economics expects growth to be driven mainly by the healthcare and private education sectors.

Unemployment rate
Although there will be no official unemployment data for October, expectations are that the November rate will exceed the 4.4% recorded in September. Unemployment rose for three consecutive months through September amid weaker hiring and rising labor force participation. At the same time, layoff announcements have increased, with the layoffs indicator in October reaching its highest level since early 2023.

Some forecasts suggest that the decline in federal employment could put additional upward pressure on unemployment, potentially pushing it to 4.6%.

What else markets will watch
The labor report will not be the only key release on Tuesday. The Commerce Department will also publish October retail sales data. Excluding autos and fuel, spending is expected to accelerate, pointing to resilient consumer demand at the start of the fourth quarter. Overall retail sales, not adjusted for inflation, are likely to rise by a modest 0.1%.

Later in the week, U.S. consumer inflation data for November will also be released. This report will also be atypical, as October data are missing due to the shutdown. As a result, there will be no month-over-month comparisons, and investors will focus primarily on year-over-year inflation rates to assess the direction of price pressures.

Impact on the dollar and equity markets
If the data confirm weaker job growth and a rise in unemployment toward 4.5%–4.6%, expectations will strengthen that the Federal Reserve has finished its rate-hiking cycle and could move toward a more accommodative stance in 2025. Such a scenario would weigh on the U.S. dollar, as investors price in earlier and deeper rate cuts.

For equity markets, softer labor market data could be viewed positively, particularly for interest-rate-sensitive stocks such as those in the technology sector. A weaker labor market would reduce the risk of further monetary tightening and support valuations through lower discount rates.

On the other hand, if employment proves stronger than expected and unemployment remains stable or declines, the dollar could receive short-term support, as markets reassess the likelihood of interest rates staying higher for longer. In that case, equities—especially highly leveraged companies—could come under pressure, as concerns about “higher for longer” rates resurface.

Overall, market reactions are likely to be more pronounced due to data distortions linked to the government shutdown, which increase volatility and make initial moves in the dollar and equities more sensitive to surprises relative to expectations.

— Source: Bloomberg Terminal