Is this Friday's non-farm payroll going to be terrible? The Federal Reserve's "hot ticket committee" and Biden's chief economic advisor are both "taking precautions."

The U.S. non-farm payroll report for October, to be released this Friday, may bring bad news for the labor market, as recent statements from Federal Reserve "voting members" like Christopher Waller and Biden's chief economic advisor Lael Brainard have a tone of "taking precautions." Economists proposing the "Sahm Rule" even predict that in the worst-case scenario, it may not be about job growth anymore, but rather a decline in employment.

In a public speech two weeks ago, Waller, a Federal Reserve governor who has been rumored to be a strong contender for the next Federal Reserve chair, issued a warning that this month's employment report could show a significant decline.

Waller, who has long held voting rights on the Federal Open Market Committee (FOMC), stated that despite disappointing new inflation data from the most recent FOMC meeting, he still believes that the U.S. economic fundamentals are solid, with employment and inflation close to the Federal Reserve's targets. He will be looking for more evidence to support this view in the coming weeks and months. He then said:

"But unfortunately, the October employment report, released before the next FOMC meeting, is not easy to interpret. This report is likely to show that the recent hurricanes and the Boeing strike have led to a significant amount of temporary unemployment. I expect these factors may result in a reduction of over 100,000 jobs this month (October), with little impact on the unemployment rate, but I am not sure the impact will be that obvious. Since the employment report will be released during the (Federal Reserve) decision-makers' quiet period for economic commentary, none of us (at the Federal Reserve) will try to view this low data objectively, but I hope others will do so."

On Wednesday, former Federal Reserve governor and current White House National Economic Council director Lael Brainard explicitly warned that due to disruptive strikes and hurricane impacts, the White House expects the non-farm payrolls for October to decline when announced this Friday.

Currently, the market generally expects that the U.S. Department of Labor will report an increase of 110,000 non-farm jobs for October, less than half of the unexpectedly large increase of 254,000 in September. The remarks from Waller and Brainard also reflect expectations of a significant slowdown in job growth.

The day after Brainard's remarks, White House economic advisor Jared Bernstein mentioned that employment would be negatively impacted, stating that the October non-farm payroll report to be released on Friday may be distorted by the consecutive hurricanes. He believes that U.S. inflation is slowing and is now close to the Federal Reserve's target of 2%. Real wages are rising, and the overall economic situation remains robust.

On Tuesday, Claudia Sahm, the proponent of the "Sahm Rule" and a former Federal Reserve economist, also published an explanation that a significant decline in employment in October is reasonable given the impacts of the hurricanes and the Boeing strike.

She provided the following chart, stating that if the employment growth returns to the pre-COVID average level of 183,000 jobs per month from 2017-2019, represented by the deep blue bars on the left side of the chart. Ignoring the hurricanes and the Boeing strike, initial estimates are always inaccurate. The 90% confidence interval based on sampling error is plus or minus 130,000, represented by the upper and lower limits of the light blue barsTherefore, even if wage growth is in line with trend levels, the estimated maximum and minimum values may differ significantly.

The orange bar on the right side of the chart represents the number of people affected by Hurricane Helene and Milton, as well as the Boeing strike, which reduced the new employment figures by 100,000. The lower limit of the 90% confidence interval is nearly a negative growth of 50,000.

Sam said that if there is negative growth, it may cause some dissatisfaction, but at least in this case, it may be consistent with the steady growth trend of the labor market.

It is worth mentioning that when the employment report is released this Friday, there will be only four days left until the U.S. presidential election. Albert Edwards, a global strategist at Société Générale, believes that if the employment data is extremely weak, it will make headlines and could impact the election. Edwards noted that during the 1970 UK election, Labour Prime Minister Wilson was expected to win re-election by a landslide, but the trade data released before the election was shockingly poor, resulting in Wilson's defeat.

However, even if the U.S. employment data is very bad this time, it may not affect the outcome of the election. Some commentators have pointed out that the unexpectedly weak JOLTS data released earlier this week is already a significant signal