Why a weak October jobs report won’t be a ‘huge deal’ for the Fed

Investors are bracing for a slew of earnings and economic data ahead of the Federal Reserve’s latest interest rate decision. Eric Wallerstein, Yardeni Research chief markets strategist, joins Market Domination Overtime to discuss what will be driving markets and what investors can expect from the Fed decision.

Wallerstein argues that earnings will “probably be in the driver’s seat.” He expects “really strong” third quarter GDP growth and both real incomes and real spending to rise. However, he expects the latest payrolls data to be muddled by Hurricane Milton, the Boeing (BA) strike, and Stellantis (STLA) layoffs, making it a difficult read for investors.

While he anticipates a slight uptick in the unemployment rate and slower payrolls growth, he believes that the labor market overall remains in good shape: “Layoffs have been due to workers asking for exorbitant pay increases, not because of some broad cyclical slowdown.” He adds that even if payroll growth subsides, it will rebound through the end of 2024.

If the October jobs report comes in weaker than expected, Wallerstein believes it won’t be a “huge deal.” He explains:

“I think the Fed is uber-committed to being dovish. So I think based on some recent Fed speak, there’s a chance that given the bulk of economic data we’ve seen, some of the more hawkish members get a little more sway at the upcoming meeting. I don’t think a super weak payrolls report would be that concerning, unless it looked like it was really cyclical sectors that we’re seeing layoffs.”

To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.

This post was written by Melanie Riehl