US Employment Trend Continues to Show Weakness; Expect Below Consensus NFP of 172,000 for November 2023

The number of job openings in the US for October 2023 decreased to 8.7 million, according to the latest Job Openings and Labor Turnover Survey (JOLTS). This is well below the consensus expectation of 9.3 million and previous months reading of 9.3 million. The current data marks a notable drop to levels not seen in over two and a half years, potentially signaling a cooling in the labor market following the unexpected positive trends in recent months, says GlobalData.

GlobalData’s US Active Jobs index, derived from high frequency company job postings dataset, which has 90+% correlation with JOLTS data and available in near real-time, predicted a fall in JOLTS data for October, but the November reading is also weak, pointing to a jobs gain of 172,000 in the nonfarm payroll (NFP) data to be released on 8 November, below consensus estimate of 180,000.

Adarsh Jain, CFA, Director of Financial Markets team at GlobalData, comments: “GlobalData’s real-time active jobs index points to a cooling labor market in the US, for both October and November. While JOLTS data re-affirmed this weakness for October, we think our estimate of weakening trends for November will reflect in below consensus NFP data for November.”

The latest ADP payroll data, which tracks private employment using anonymized payroll data supports the weakening job market, with just 103,000 increases in payrolls in November against the consensus expectation of 128,000 and slightly below the October reading of 106,000.

The US NFP will provide a better employment picture as it is done on a larger sample and is more real-time compared to the JOLTS. GlobalData’s proprietary NFP nowcasting model, using high frequency jobs data, estimates 172,000 job additions, below the consensus estimate of 180,000 job additions.

Jain concludes: “While the 172,000 NFP estimate for November is above the September reading of 150,000, but it is still meaningfully below the average of over 200,000 for 2023, and the weakness is likely to persist for the remainder of 2023.

“The current employment trends are consistent with a cooling labor market, driven by the 525 basis points interest rate hike the Fed has engineered since Mar-2022, and the recent pause in hikes seems reasonable. However, GlobalData expects the NFP data releases to show an improvement in 2024 as the Fed potentially moves from a pause in rates to cuts and an environment of general loosening of financial conditions. All eyes will be on what the Fed does in its last meeting for 2023 on 12/13 December. Has the labor market cooled down sufficiently to move from pause to cuts? Or it waits until inflation is further under control? Time will tell.”