U.S. October Nonfarm Payrolls Expected at 65K, Wage Growth May Fall Below 3%
nashnova research
U.S. October nonfarm payrolls are forecast at 65,000 while wage growth may slip below 3% for the first time in five and a half years — a labor market that is neither collapsing nor stoking inflation, giving the Fed more room to hike in December.
Why should October look better than September?
September payrolls came in at just 29,000, partly because a Labor Day calendar shift distorted the count — a statistical quirk, not a real demand cliff.
October is expected at 65,000, a technical rebound. This means → the uptick is mostly "making up for last month's counting glitch," not a genuine pick-up in hiring.
Economists caution that October's seasonal-adjustment factor works against the headline number. Forecasts range from 35,000 to 125,000, leaving meaningful downside risk.
What does wage growth below 3% signal?
Average hourly earnings are forecast at 2.9% year-on-year — if confirmed, the first reading below 3% in roughly five and a half years.
In plain terms = pay raises are losing momentum, and the pressure on business labor costs is fading. ING chief international economist James Knightley put it bluntly: "The jobs market is not generating any meaningful wage growth right now."
This reflects a deeper shift: limited job-switching opportunities are suppressing workers' bargaining power, keeping them in place rather than chasing raises elsewhere.
GDP is growing at 3.4% — so why is hiring slowing?
Monthly payroll gains this year average about 68,000, far below the roughly 150,000 monthly average in 2024 — even as Q3 GDP hit an annualized 3.4%.
This means → the economy is still expanding, but the way it grows has changed. EY-Parthenon chief economist Gregory Daco calls it "job-light expansion": firms are channeling spending into AI and technology, squeezing more output from existing staff rather than adding headcount.
The "break-even" payroll level — the monthly number needed to keep pace with working-age population growth — has fallen from roughly 150,000/month in 2024 to about 40,000/month, driven by tighter immigration and an aging population shrinking labor supply itself.
What does this mean for the Fed's December decision?
Markets currently price a roughly 70% probability of a December rate hike. A stronger-than-expected Friday report, combined with expectations of higher October inflation data, could push that probability even higher.
But wage growth below 3% cuts both ways: it tamps down inflation expectations, giving the Fed confidence to hike, yet it also erodes household purchasing power — real disposable income already declined in September after adjusting for inflation and taxes.
Put simply = the Fed has more near-term cover to raise rates, but slowing consumption and a broader economic cool-down expected in Q4 and into 2027 will limit how much further it can go.
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