The job market, characterized by "low hiring and low layoffs," will face another test on Friday (November 6th), one of the final tests before the Federal Reserve decides whether to raise interest rates again. Economists generally expect the Bureau of Labor Statistics to report approximately 59,000 new jobs in October, Beijing time, Friday evening. This would more than double the 29,000 added in September—the September figure was far below expectations and accompanied by downward revisions to July and August employment data. The unemployment rate is expected to remain at 4.2%, after a slight increase of 0.1 percentage point in the previous month. One institution noted in a report that continuing jobless claims data "indicates that layoffs across the economy remain under control."

Labor pool shrinking: Average hiring of 68,000 is sufficient to maintain unemployment rate stability

As of September, the average hiring was approximately 68,000 per month, up from 15,000 per month in 2025. This is sufficient to keep the unemployment rate stable, as reduced retirements and immigration have shrunk the pool of people entering the labor market. One chief economist stated that employers may not need to add a single job nationwide to prevent the unemployment rate from rising. "The labor market is contracting," she wrote in her analysis. This implies that a stable unemployment rate does not equate to a healthy job market—it may reflect a contraction in labor supply rather than strong demand.

Real income shrank: Hourly wages rose by about 2.9% year-on-year, lower than the inflation rate of 3.7%.

However, a stable job market does not necessarily indicate a healthy one. Forecasters predict that average hourly wages will rise 0.3% month-over-month in October, compared to 0.1% in September; this would bring wages up by approximately 2.9% year-over-year, while the 12-month inflation rate ending in September was 3.7%—meaning wages are shrinking relative to prices. Analysis of client deposits by some institutions shows that the extent to which inflation is outpacing wages varies: in October, after-tax income for low-income households increased by 4.7% year-over-year, for middle-income households by 3.8%, and for high-income households by 3.4%. The bank's data also shows that low- and middle-income workers are experiencing larger pay rises from job hopping than high-income workers.

The Federal Reserve's dilemma: a "squeezed" job market, with a greater than 80% probability of a December rate hike.

"The October jobs report likely shows little change in the health and direction of the U.S. labor market," said a senior director of economic research at one institution. "It's a squeezed environment for everyone," said the chief economist at another institution. This squeeze is also the Federal Reserve's predicament. The central bank kept its benchmark interest rate at 3.75% to 4% last month, following its first rate hike since 2023 the previous month, with two of the 12 voters advocating for a further 25 basis point increase. The November jobs report will be released on December 4, earlier than the Fed meeting on December 9—its last meeting of the year. According to the CME FedWatch tool, traders are currently pricing in a greater than 80% probability of a rate hike at that meeting, and analysts point out that a jobs report close to expectations could allow the Fed to maintain this path.

Editor's Summary

The October non-farm payrolls report generally points to a moderate rebound, but it is far from returning to historically normal levels. The stable unemployment rate reflects a contraction in labor supply rather than a recovery in demand. Real income continues to lag behind inflation, with low- and middle-income families facing particularly acute pressure. The Federal Reserve faces the dual constraints of employment and inflation. Data close to expectations will continue to support a high probability of a December rate hike, but the final decision will depend on the evolution of subsequent inflation and growth signals.

Frequently Asked Questions

Q: Why is it that only about 60,000 new jobs are enough to stabilize the unemployment rate? A: The key lies in the continued contraction of the labor supply pool. The increase in the retirement population, coupled with a slowdown in immigration inflows, has significantly reduced the number of people entering the labor market each month. The current average monthly recruitment of about 68,000 is sufficient to match the reduced supply, thus maintaining the unemployment rate around 4.2%. This is not a sign of strong demand, but rather a result of a simultaneous cooling on both the supply and demand sides. If the labor force participation rate declines further, even with lower recruitment, the unemployment rate may continue to stabilize or even decline. Therefore, the market is more focused on the structural mismatch between long-term unemployment and job vacancies, rather than simply the number of new jobs. Q: Why is a 2.9% year-on-year increase in hourly wages still considered a reduction in real income? A: Because the inflation rate during the same period was about 3.7%, nominal wage growth continued to lag behind price increases, resulting in a decline in real purchasing power. Although the after-tax income growth of low-income families reached 4.7%, inflation erosion was more pronounced; the growth rate for middle- and high-income groups was even lower. Salary increases from job hopping are higher among low- and middle-income groups, but overall, they still cannot fully offset price pressures. This pattern directly suppresses consumer spending, a factor the Federal Reserve must weigh when assessing the "overheating risk." An unexpected acceleration in wage data could strengthen expectations of a rate hike; continued weakness would exacerbate the policy dilemma. Q: Why is the Fed maintaining a high probability of rate hikes despite slowing employment? A: The core issue lies in the stickiness of inflation and the "squeezed" rather than collapsing labor market. The central bank held rates steady last month, but the probability of a December rate hike remains high, reflecting officials' caution regarding the pace of inflation decline. If employment data is close to consensus, it means there is neither a risk of large-scale layoffs nor overheating pressure, allowing the policy path to continue leaning towards tightening. What truly changes pricing is often wages and revision details: significant upward revisions or wage acceleration will increase the probability of a rate hike, while significant downward revisions may cause the market to repric. The November report on December 4th will be the final key window. Q: What does "low hiring, low layoffs" mean for the economy? A: This is a typical "frozen" state. Businesses are unwilling to hire on a large scale or lay off a large number of employees, reflecting hesitation about the demand outlook. A stable unemployment rate masks the fact that the labor supply is contracting, and the mismatch between long-term unemployed and job vacancies may continue to accumulate. For growth, this means that employment's contribution to GDP is weakening, and consumption is more reliant on improvements in real income. If subsequent data confirms this pattern, the Federal Reserve may need to more finely adjust its path between "preventing inflation" and "preventing overheating," rather than simply relying on employment figures. Q: How might this non-farm payroll data affect the dollar and US Treasury bonds? A: Consensus-driven, moderate data usually limits volatility in the dollar and US Treasury yields, as the path of interest rate hikes is already partially priced in. If new jobs and wages are significantly stronger than expected, the dollar may strengthen and yields may rise; if they are significantly weaker than expected and accompanied by downward revisions, it could trigger a dollar pullback and yield declines. The market is more focused on revisions and wage details than on a single headline figure. In the final weeks before the December rate decision, any unexpected signals could amplify volatility, and investors need to simultaneously track inflation and consumption data to determine the pace of policy shifts.