Economy

September’s jobs picture is expected to look a lot like August’s — a gradual slowdown in hiring and a modest increase in wages.
Markets will be watching the report closely for indications as to whether the Fed will be able to loosen policy and lower interest rates in a gradual manner.
For the past several months, labor market indicators have been trending lower, though far from off a cliff.

Attendees at the Albany Job Fair in Latham, New York, US, on Wednesday, Oct. 2, 2024. 
Angus Mordant | Bloomberg | Getty Images

September’s jobs picture is expected to look a lot like August’s — a gradual slowdown in hiring from earlier this year, a modest increase in wages and a labor market that is looking a lot like many policymakers had hoped it would.
Nonfarm payrolls are projected to show growth of 150,000, from 142,000 the month before, with a steady unemployment rate of 4.2%, according to the Dow Jones consensus. On the wage side, the forecast is for a 0.3% monthly gain and a 3.8% increase from a year ago — the annual rate being the same as August.

Should the numbers come in as expected, they would hit close to a sweet spot allowing the Federal Reserve to continue to lower interest rates without a sense of urgency that it could be behind the curve and at risk of causing a recession.
“The jobs market is slowing down and becoming less tight,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “The balance of power has shifted back to employers and away from employees, and that certainly will alleviate the wage pressure, which has been a key component of inflation. We’ve been team soft-landing for a while, and this is exactly what a soft landing looks like.”
Of course, there’s always the possibility of a substantial upside or downside surprise to the numbers. Then there are the monthly revisions that have been dramatic at times, causing the Labor Department to overcount hiring by more than 800,000 for the 12-month period through March 2024, adding uncertainty to jobs market analysis.

“While we’re looking at 150,000 jobs added, I would not be surprised if it comes in at 50,000 and I would not be surprised if it comes in at 250,000,” said David Kelly, chief global strategist at JPMorgan Asset Management. “I don’t think people should get too freaked out either way about this number.”
The Bureau of Labor Statistics will release the report at 8:30 a.m. While there will still be one more nonfarm payrolls count before the presidential vote next month, the October report is expected to be distorted by the dock workers’ strike as well as Hurricane Helene — making September the last “clean” report before Election Day.

Looking for clues

Still, markets will in fact be watching the report closely.
Specifically, they’ll be looking for indications as to whether the Fed will be able to loosen policy and lower interest rates in a gradual manner more in keeping with prior easing cycles, or will have to repeat the dramatic half percentage point interest rate cut it implemented in September.
At the same meeting where they approved the reduction, policymakers indicated another half percentage point, or 50 basis points, in cuts before the end of 2024 and another full percentage point in 2025. Markets, though, are pricing in a more aggressive schedule.
“A strong number wouldn’t really change their position,” JPMorgan’s Kelly said. “A weak number could tempt them to another 50 basis points.”
However, Kelly said the Fed is more likely to look at the employment picture as a “mosaic” rather than just an individual data point.

The bigger picture

For the past several months, labor market indicators have been trending lower, though far from falling off a cliff. Manufacturing and services sector surveys have pointed to slower hiring, while Fed Chair Jerome Powell earlier this week characterized the labor market as solid but softening.
Excluding a brief slump at the onset of the Covid pandemic, the last time the monthly hiring rate was the level seen this summer — 3.3% of the labor force in both June and August — was in October 2013 when the unemployment rate was 7.2%, according to Labor Department data.
Job openings also have fallen and pushed the ratio of available positions to unemployed workers down to 1.1 to 1, from 2 to 1 just a couple years ago.
However, a kind of stasis has hit a labor market that not that long ago was wrestling with the “Great Resignation” as workers confident they could find better deals elsewhere left their jobs en masse.
Excluding the pandemic gyrations in 2020, the quits rate hasn’t been lower than its current 1.9% since December 2014, while the separations rate, even including Covid, was last lower than the current 3.1% in December 2012.
“Whatever leverage labor had, [it] has dissipated or just eased as the economy’s normalized,” said Joseph Brusuelas, chief economist at tax consultancy RSM. “So we’re going to have a lot less turnover. We’re seeing it in our business. We’re hearing it from our clients.”
Still, had someone told Brusuelas back during the Covid tumult four years ago that the economy would be adding nearly 150,000 jobs a month now with an unemployment rate in the low 4% range, he said, “I’d have bought you a steak dinner.” More

(Reuters) -A U.S. judge on Thursday temporarily blocked Democratic President Joe Biden’s administration from implementing a plan to forgive student loan debt held by millions of Americans. The ruling by St. Louis-based U.S. District Judge Matthew Schelp handed a victory to six Republican state attorneys general who challenged Biden’s plan. Schelp, an appointee of Republican former President Donald Trump, issued a preliminary injunction blocking the Biden administration from “mass canceling” student loans and forgiving principal or interest under the plan pending the outcome of the state’s lawsuit.Schelp ruled after another judge on Oct. 2 transferred the litigation from Georgia and removed that state from the case by finding it would not experience any legal harm under the debt relief plan. The state attorneys general have accused the U.S. Department of Education of overreaching its authority by proposing a regulation that instead should be addressed through legislation in Congress. The department proposed it in April after two previous plans were blocked by the courts. It would forgive $73 billion in student loan debt held by an estimated 27.6 million borrowers.Biden campaigned for president in 2020 with a pledge to bring debt relief to millions of Americans who turned to federal student loans to fund their costly higher education.The lawsuit was filed in Georgia, where U.S. District Judge J. Randal Hall in September issued a temporary block on the plan, though that expired on Oct. 3. Hall is the judge who moved the case to Missouri.Schelp on Thursday said he agreed with Hall that the relief program should be halted until courts have had a chance to decide whether it is legal. “Allowing Defendants to eliminate the student loan debt at issue here would prevent this Court, the U.S. Court of Appeals, and the Supreme Court from reviewing this matter on the backend, allowing Defendants’ actions to evade review,” Schelp wrote.Missouri Attorney General Andrew Bailey, a Republican, in a statement called the ruling “yet another win for the American people.””The Court rightfully recognized Joe Biden and Kamala Harris cannot saddle working Americans with Ivy League debt,” Bailey said.The U.S. Department of Education did not immediately respond to a request for comment. Under the proposed regulation, debt relief would be granted to: people who owe more than they first borrowed due to the interest that has accrued; those who have been paying off loans for at least 20 or 25 years, depending on the circumstances; and borrowers who were eligible for forgiveness under prior programs but never applied.The rule has not yet been finalized, a point the U.S. Justice Department made in arguing there was no final agency action for a judge to review in the first place.The states argued that the administration was laying the groundwork to immediately cancel loans once the rule became final before any challenger could sue to stop it. They said that upon publication of the regulation, the Education Department would be able to instruct loan servicers to immediately process the debt forgiveness.The attorneys general said such action would occur in the run-up to the Nov. 5 presidential election pitting Democratic candidate Kamala Harris, who is vice president under Biden, against Republican rival Trump, and that the administration would seek political credit for the policy.The White House has called the current student loan system broken and has said debt relief is necessary to ensure that borrowers are not financially burdened by their decision to seek higher education.Republicans counter that Biden’s student loan forgiveness approach amounts to an overreach of authority and an unfair benefit to college-educated borrowers while others receive no such relief. More

(Reuters) – A look at the day ahead in Asian markets.What comes down must go up.And so it is with oil, whose rise on escalating fears over a deepening conflict in the Middle East is casting an increasingly dark shadow over world markets as the week draws to a close. Brent crude leaped more than 5% on Thursday for its biggest rise in a year, bringing the week-to-date gains to more than 8%. If oil holds steady on Friday, it will clock its biggest weekly rise since January last year. It’s true that oil’s rebound is coming from a low base and prices are back to where they were only a month ago, but world stocks and investors’ risk appetite are beginning to feel the heat. The oil price is still around 10% lower than it was a year ago and has been negative on a year-on-year basis since July, a dynamic that has highlighted the mounting disinflationary pressures around the world.But it was down nearly 30% year-on-year only a few weeks ago. If geopolitical tensions persist and oil continues to rise, investors may need to rethink their inflation outlooks. U.S. Treasury yields are rising and the yield curve is steepening, led by the long end, which suggests longer-term inflation worries may be creeping into investors’ minds. For Asia, the tailwinds from China’s stimulus bonanza last week appear to be fading in the face of growing headwinds from oil and risk aversion. Another notable consequence of escalating geopolitical tensions is the burst of safe-haven demand for the U.S. dollar. The dollar index on Thursday hit a six-week high, and is on track for its biggest weekly rise since April.Put the two together – higher Treasury yields and a stronger dollar – and it’s not a particularly attractive backdrop for Asian markets. Especially on a Friday, a day after the MSCI Asia ex-Japan index hit its highest level since January 2022.The Asian economic calendar on Friday is fairly light, with consumer inflation from the Philippines, retail sales data from Singapore, services purchasing managers index and manufacturing PMI reports from India and Hong Kong, respectively, as the main releases.Global events are likely to set the market tone on Friday.Investors in Asia may also be of a mind to play it safe ahead of the U.S. non-farm payrolls report for September out of Washington on Friday morning. This and the October data will go a long way to determining the size of the expected interest rate cut in early November.Rates futures market pricing is currently evenly split over a 25 or 50 basis point cut. Here are key developments that could provide more direction to Asian markets on Friday:- Philippines inflation (September)- India services PMI (September)- Singapore retail sales (August) More

WHY IT’S IMPORTANTThe Biden administration is eager to show that its policies are saving consumers money, bolstering a key theme of Vice President Kamala Harris’ run for the presidency — to help ease high living costs.The Treasury said that Direct File could save taxpayers tens of millions of dollars in tax preparation fees during the 2025 tax filing season A pilot version of the program that started this year was funded out of the roughly $60 billion in supplemental modernization funding for the IRS approved in the 2022 Inflation Reduction Act clean energy law.BY THE NUMBERSFor the 2024 filing season, which covered the 2023 tax year, more than 140,000 taxpayers in 12 states used the Direct File pilot program to file relatively simple tax returns with W-2 wage income and standard deductions.For the 24 states participating in the project next year, Direct File will allow tax returns with additional types of incomes, credits and deductions, expanding the pool of eligible users to over 30 million. But taxpayers who itemize their tax returns with mortgage interest and some other deductions will not be eligible to use the system yet.The Treasury estimates the average American taxpayer spends $270 and 13 hours filing their tax return.KEY QUOTE”By doubling the number of participating states and expanding eligibility, Direct File has the potential to save Americans tens of millions of dollars in filing fees in the upcoming filing season, advancing the Biden-Harris Administration’s goal of reducing costs for American families,” Treasury Secretary Janet Yellen said in a statement. The Direct File system will be available next year in Alaska, Arizona, California, Connecticut, Florida, Idaho, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming. More

(Reuters) – U.S. President Joe Biden said a supplemental aid package for people affected by Hurricane Helene “can’t wait” until after the Nov. 5 election.”People need help now,” Biden said. Congress is not scheduled to return to session until after the Nov. 5 election. More

NEW YORK (Reuters) – U.S. Federal Reserve losses crossed the $200 billion point this week, according to data released on Thursday by the central bank. The Fed reported that as of Wednesday, the level of its so-called earnings remittance to the Treasury Department stood at negative $201.2 billion. The number represents a paper loss that central bank officials have noted does not impair their ability to conduct monetary policy. The negative number is captured in an accounting measure the Fed calls a deferred asset. The Fed must cover this shortfall before it can begin returning excess earnings to the Treasury. Fed losses flow from the high-interest rate monetary policy path it had been pursuing to bring down inflation. The Fed pays banks and money funds to park cash at the central bank to keep short-term interest rates at the desired levels. The Fed tilted into loss two years ago and faced record red ink in 2023, as the money it has had to pay out to manage rates has outstripped the money it makes from the interest earned from bonds it holds. The Fed funds itself through services it provides to the banking system and via the interest on bonds it owns. It returns any profits to the Treasury Department as required by law, and for many years, the central bank has handed back substantial sums: St. Louis Fed research said that between 2011 and 2021 the Fed returned nearly $1 trillion to the Treasury. The loss-making situation is tied to an aggressive cycle of rate rises done between March 2022 and July 2023 that saw the central bank’s interest rate target fly up from near zero levels to between 5.25% and 5.5%. The Fed said in March that its paper loss last year totaled $114.3 billion. It paid out $176.8 billion to banks and $104.3 billion via its reverse repo facility, while earning $163.8 billion via interest on bonds on its balance sheet. With the Fed’s recent half percentage point rate cut and the prospect of more easing, it will likely see a slower pace of losses growing forward, as it will face a smaller level of interest expenses to maintain its rate target. Before the Fed can return cash to Treasury, however, it will have to effectively pay back the deferred asset, which could take years. Thus far, the Fed has not faced any political heat for its financial situation, although that surprises some, including former central bankers. More

NEW YORK (Reuters) -Traders gauging how to play further downside in the U.S. dollar are looking to the relative strength of economies around the world, as interest rate shifts from global central banks shake up currency markets. The U.S. dollar index fell 4.8% against a basket of currencies in the third quarter, its worst quarterly performance in nearly two years. Pressure on the U.S. currency increased after the Fed delivered a jumbo-sized 50 basis point cut last month, its first reduction since 2020.How much further the dollar falls and which currencies will benefit may largely be a question of yields. For years, U.S. yields have stood above most developed economies, bolstering the dollar’s allure against its peers. That picture is shifting, with the Fed and most other central banks cutting interest rates to safeguard economic growth. Many traders betting against the buck are doing so through currencies whose yield gap with the dollar is expected to narrow.Net bets on a weaker dollar have grown to $14.1 billion in futures markets, the highest level in about a year, Commodity Futures Trading Commission data showed. The path lower for the dollar, however, is likely to be a bumpy one. The comparatively strong U.S. economy could limit how much the Fed cuts rates, complicating the outlook for further dollar declines. Meanwhile, the U.S. presidential election and geopolitical worries threaten to inject further volatility into currency markets in coming weeks. “It’s not just necessarily ‘sell the dollar and buy everything,'” said Jack McIntyre, portfolio manager at Brandywine Global. “You have to be a little more selective.”While the dollar index is little changed for the year, it is down about 5% from its April high, with the currency notching drops against several developed market peers as U.S. yields fell in anticipation of monetary policy easing by the Fed.Some of the risks to the weaker dollar view became more apparent in recent days. The dollar rose sharply against the British pound on Thursday after the Bank of England said it could move more aggressively to cut interest rates if inflation pressures continued to weaken.A day before, data showed euro zone inflation dipped below 2% for the first time since mid-2021 in September, reinforcing the case for the European Central Bank to cut rates this month, a potential source of weakness for the euro. The dollar’s role as a safe haven has also been on display as Middle East tensions have escalated in recent days. From the U.S. side, Friday’s labor market data could help shape views on how much the Fed might cut rates for the rest of the year.Though futures markets show an additional 68 basis points of cuts priced in, a strong number could bolster the case for more moderate policy easing. However, “if we are entering a soft patch for the U.S. economy, the market is going to discount more cuts into the curve and that will weaken the dollar,” said Christian Dery, head of macro strategy at Capital Fund Management. Nevertheless, investors believe more downside remains for the dollar in some corners of the market.Paresh Upadhyaya, director of fixed-income and currency strategy at Amundi US, said he is looking for “idiosyncratic stories like widening interest rate differentials caused by a divergence in monetary policy.”His plays on a weaker dollar include positions in the Norwegian krone and Australian dollar. Norway’s central bank recently held its policy interest rate at a 16-year high, signaling any cuts must wait until early 2025. Australia’s central bank held rates steady last week and said interest rate cuts were unlikely in the near term.Upadhyaya also added to a position in the Brazilian real. Unlike many of its peers, Brazil’s central bank hiked rates last month as it looks to tackle a challenging inflation outlook. The Brazilian real is down about 10% against the dollar this year. The Japanese yen could also find further support from diverging central bank policy, investors said. The Bank of Japan tightened rates to 0.25% in July in a landmark shift away from a decade-long stimulus program aimed at firing up economic growth.Though the Bank of Japan has signaled it is in no rush to raise rates further, the narrowing gap between rates in Japan and the U.S. has already fueled a 10% rally in the yen from its 2024 lows against the dollar. Net bullish bets on the currency against the dollar stand at $5.8 billion, CFTC data showed.”With global central banks also starting to cut rates, the biggest gainer versus the USD will be in the likes of the (yen),” said Natsumi Matsuba, head of FX trading and portfolio management at Russell Investments. An analysis of currency valuations based on metrics such as purchasing power parity and real effective exchange rates released by BofA Global Research last month showed that the yen and Norwegian krone are among the developed world’s most undervalued currencies. The dollar and Swiss franc are the two most overvalued, the study found. Whatever their positioning, however, investors must also contend with potential volatility surrounding the U.S. presidential election, slated for Nov. 5. Uncertainty in the weeks before the vote could send safety-seeking investors to the dollar. Many investors also believe a win by Republican candidate Donald Trump could buoy the dollar. “The wild card in any forecast right now for our currency is the U.S. election,” said Brandywine’s McIntyre, who remains bearish on the U.S. dollar, but less so than before the currency’s recent slide. “That’s why it’s hard to be super convicted.” More