For months, the U.S. labor market has been sending mixed signals, cooling in some places and holding steady in others, leaving investors unsure whether the slowdown is orderly or whether something more vulnerable is forming beneath the surface.
That uncertainty comes to a head this week.
On Tuesday, the Bureau of Labor Statistics will release its November employment situation report along with long-awaited establishment survey data for October, which packs two months of labor market signals into one day after the government shutdown disrupted the normal data cycle.
While the November report will include both nonfarm payrolls and the unemployment rate, the October report will not report an official unemployment rate because the household survey was not collected during the shutdown and cannot be reconstructed.
October and November Jobs Data: What Economists and Traders Expect
The consensus among Wall Street experts, tracked by TradingEconomics, expects nonfarm payrolls to rise by about 40,000 in November, a sharp slowdown from September’s 119,000 increase and well below the pace typically associated with a healthy labor market.
The unemployment rate is expected to remain at 4.4%.
Traders, meanwhile, are a bit more hopeful. Betting markets imply better odds for a stronger print, although even there enthusiasm is rapidly waning as job gains rise.
The probabilities tracked by Kalshi imply an average outcome closer to the 60,000 jobs created in November. The platform assigns an 81% chance that wage growth will remain positive, but only a 25% chance that profits will exceed 100,000.
The probability of a print above 150,000 drops to just 11%, highlighting how skewed expectations have become towards a softer outcome.
Goldman Sachs expects payrolls to rise by about 10,000 in October and about 10,000 in November, slightly above consensus but still below recent averages.
According to Goldman’s economist Ronnie Walker, key wage figures are distorted by government effects rather than underlying weakness in the private sector.
Why this matters to the markets
Markets currently estimate only a modest likelihood of a rate cut in January, especially after the Fed presidency Jerome Powell recently emphasized that policymakers are “well positioned” to wait and evaluate incoming data.
Tuesday’s jobs report could test that patience.
A modest setback – wage growth falling short of expectations without a sharp deterioration in unemployment – would likely be enough to revive easing in the near term.
In that scenario, interest-rate-sensitive assets could benefit if government bond yields fall.
That could be a positive scenario for the SPDR Gold Shares ETF (NYSE:GLD) amid expectations for lower interest rates and a likely weaker dollar.
A sharper slowdown, however, would tell a different story.
If wage growth slows substantially, or turns negative, or if the unemployment rate rises more decisively, the market’s focus could shift from policy easing to economic risk.
In that case, even a sharp rise in interest rate cut expectations could struggle to offset concerns about consumer demand, corporate profits and labor income growth, weighing on broader risk appetite. Assets such as long-term government bonds – followed by the iShares 20+ year government bond ETF (NASDAQ:TLT) – would likely be seen as the safe haven for investors.
The upside scenario comes with its own tradeoffs. A stronger-than-expected jobs print could indicate that the labor market remains resilient ahead of the holidays, reinforcing the idea that consumers still have purchasing power.
This outcome could support cyclical sectors – such as the US economy Discretionary Select Sector SPDR fund for consumers (NYSE:XLY) – bank stocks and parts of technology tied to economic activity, even as this pushes up Treasury yields and lowers expectations for Fed easing in the near term.
In short, when the jobs numbers are released Tuesday morning, investors won’t just be analyzing the headlines.
They will try to answer a more consequential question: Has the labor market cooled just enough to give the Fed flexibility — or far enough to raise concerns about what comes next?
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