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Wall Street Awaits ISM Manufacturing Index Data

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Economic & Earnings Commentary

The long-awaited Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) is out this morning. At first glance, it looks paltry: 12K new jobs were filled in October, with downward revisions to the previous two months. The Unemployment Rate remained unchanged at 4.1%.

Why the disconnect between the two headline numbers? Because they pull from two different surveys: the 12K job gains comes from the Establishment survey, while unemployment is a reflection of the Household survey.

The Meaning Behind Today’s Jobs Numbers

Also, consider two mitigating factors with October’s labor force: two major hurricanes hit Florida and spread through the Southeastern U.S., and a labor strike along the Atlantic Coast add a bit of complex static to these numbers. Jobs affected due to bad weather reached 512K, while labor disputes only amounted to 22K jobs for the month. That’s because workers still on their respective payrolls who go on strike are still counted as job holders.

September’s strong 254K initial number dwindled to 223K in today’s revision. August’s 159K was taken down to 78K. Neither of these were hurricane or strike-related figures. What we continue to see, even with a potential big upswell in next month’s BLS headline, is that the labor market is still cooling.

Why is this important? Because as of this morning, you can book the 25 bps cut to interest rates from the Fed next week. Keep in mind, this would only bring down rates to the long-term average between 4.50-4.75%. Whether we dial down further in the December meeting depends on another round of monthly economic data, including BLS jobs numbers.

Today's BLS Jobs Report: Under the Hood

Hourly wages last month ticked up to +0.4% from a downwardly revised +0.3% for September. The average workweek rose to 34.3 hours during the period. Labor Force Participation dipped to 62.6% — the lowest number since June. And the U6 print (aka “real unemployment”) came in at 7.7% for the month.

Healthcare jobs led the way with +52K adds, followed by Government work at +40K. Construction brought in +8K. The most notable industry losers for jobs was Professional/Business Services at -49K and Manufacturing at -46K. Gone are the days of a half-million job adds from Leisure/Hospitality per month. We are entering a leaner period of jobs growth; consider this another reason to lock in the 25 bps cut next week.

Big Oil Companies Beat Slightly on Earnings

Ahead of today’s open, two of the biggest oil “supermajors” released Q3 earnings this morning: ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) . While Exxon beat earnings estimates by a penny to $1.92 per share, Chevron posted a 4-cent beat to $2.51 per share.

It’s been a tough month for oil producers, especially considering expectations, with turmoil in the Middle East in recent weeks. This may be a tip of the cap to U.S. oil production, which is historically extraordinary. That said, Exxon missed revenue estimates by -3.7% to $90.02 billion in the quarter, while Chevron beat estimates by +1.6% to %50.67 billion, which is nevertheless down from $54.08 billion in revenues from the year-ago quarter.

What to Expect for Friday Trading

After today’s opening bell, the fun continues. The final print for S&P Manufacturing PMI and ISM Manufacturing will be released for October, along with Construction Spending results and Auto Sales reports dispersed throughout the day.

Keep in mind we’ll be in a holding pattern, likely for the next week. Unless we get a quick verdict on the presidential election (recall 2020 took until the Saturday after Tuesday’s Election Day to find out who won) and the Fed’s plans for another 25 bps cut go as expected, we could see markets oscillate around current levels.


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