As autumn transitions into winter, the labor market's performance in October was marred by the impact of two successive hurricanes and a significant labor dispute, resulting in a meager job increase of merely 12,000 positions. This figure is a stark contrast to the robust expectations for November, with economists forecasting a substantial surge to the tune of 17 times the previous month's gains.

The Bureau of Labor Statistics is poised to unveil the November employment figures at 8:30 am ET on Friday, and the consensus anticipates a marked recovery from the anomalies of October. Incorporating the return of workers affected by the strikes and weather-related disruptions, the November report is projected to reveal a substantial job increase of 207,500, as per the prevailing estimates on FactSet. Meanwhile, the unemployment rate is expected to hold steady at 4.1%, a figure that has been consistent since September.

"Last month's report was one I advised my readers to disregard," remarked Dan North, the senior economist for North America at Allianz Trade. "The Bureau of Labor Statistics admitted that they couldn't accurately gauge the hurricanes' impact." He continued, "So, is there going to be a significant rebound this month? That would be a logical outcome."

Gus Faucher, the senior vice president and chief economist at PNC Financial Services Group, is even more optimistic, foreseeing a job growth of 250,000 in November. Such a dramatic increase would suggest an underlying payroll expansion of approximately 150,000 jobs per month, a figure he deems "solid and encouraging." He elaborated, "I believe the labor market remains robust, supporting income growth, which in turn enables consumers to boost their spending."

The confidence in the labor market's stability is further bolstered by the lack of a significant rise in layoffs and the downward trend in unemployment claims in recent weeks, post-hurricane spike notwithstanding. "This indicates that the labor market is still performing well," Faucher stated.

The latest Job Openings and Labor Turnover Survey (JOLTS) from the Department of Labor reported an increase in job openings nationwide, rising to 7.7 million in October from 7.4 million in September, surpassing economists' expectations of 7.5 million for October. The number of individuals resigning from their positions also saw an uptick, increasing by 228,000 to reach 3.3 million in October from the previous month.

However, compared to the same period last year, the number of resignations has decreased by 308,000. Additionally, the number of layoffs fell by 169,000 in October to 1.6 million from September.

The weekly jobless claims data paints a mixed picture of the labor market, with employers seemingly reducing their hiring efforts. The number of continued claims for unemployment benefits, filed by those who have been receiving unemployment insurance for over a week, has been nearing a three-year high. The most recent claims data, released on Thursday morning, showed a slight decrease in continuing claims, yet the first-time filings for jobless benefits, an indicator of layoffs, increased by 9,000 to 224,000, marking a six-week peak. Despite this increase, initial claims have remained relatively stable in recent months and below historical averages.

On a separate note, Challenger, Gray & Christmas's analysis of job cut activity revealed that announcements totaled 57,727 in November, a modest 3.8% increase from October. However, layoff activity remains relatively subdued. The layoffs and discharges rate, which measures layoffs as a percentage of total employment, stood at just 1% in October, close to an all-time low, according to JOLTS data. "Overall, we continue to witness a tight labor market with historically low layoffs," Faucher observed. "Businesses are hesitant to let workers go. They may be hiring less, but they're not laying off. This is a favorable time to be employed."

Despite the distorted October data, the US labor market's activity remains historically significant: the current period of employment expansion is tied for the third-longest on record, according to BLS data. However, a clear October report could have provided valuable insights into whether the labor market was weakening or regaining momentum, as noted by Claudia Sahm, chief economist at New Century Advisors. Weaker-than-anticipated job reports for July and August (which were later revised upward), coupled with slowing inflation, contributed to rate cuts from the Federal Reserve, which has become increasingly attentive to the health of the labor market. "We remain confident that, with an appropriate adjustment of our policy stance, we can maintain the strength of the economy and the labor market, with inflation sustainably decreasing to 2%," Fed Chair Jerome Powell stated last month.

Yet, the narrative for the labor market, inflation, and the broader economy could shift in the coming weeks and months. President-elect Donald Trump has pledged to implement substantial tariffs, which economists warn could impose costs on US businesses and consumers, as well as extensive deportations and immigration restrictions. The rebound and subsequent surge in immigration following the pandemic have significantly contributed to monthly job gains. "Labor supply has been a key factor that has allowed the Fed to cut rates," Brett Ryan, senior US economist at Deutsche Bank, stated in an interview. "If that equation changes, it's another reason not to cut. Our base forecast is that the Fed will not cut rates again after the December meeting and will not cut at all next year."

It is also possible that the October figure of 12,000, the lowest monthly gain in nearly four years, could be revised upward. The response rate for the establishment survey—one of two surveys that contribute to the monthly employment report—was a mere 47.4% in October, the lowest since 1991, according to BLS data. This rate has averaged 65% over the past four years. Moreover, the BLS did not make any adjustments to its estimation procedures for either the establishment or household survey; thus, by allowing the numbers to speak for themselves, this sets the stage for the modest 12,000-job figure to potentially increase in the coming months. When it comes to the jobs report, monthly estimates are considered preliminary upon initial publication, as not all respondents report their payroll data in time (particularly during crises, when submitting data to the BLS is not a priority for those dealing with the aftermath of a storm). These survey-based estimates are revised twice more and then held constant until the BLS applies its comprehensive "benchmarking" process to align the estimates with quarterly tax filings.