Investors Watch Jobs Data as Fed Easing Hinges on October Numbers

JPMorgan’s U.S. equities trading team has highlighted the potential for a “moment of explosive growth” in the U.S. stock market, driven by key economic data points expected to be released in early to mid-October. The firm’s analysis suggests that investors should closely watch two major indicators: the Nonfarm Payrolls (NFP) and the unemployment rate. These figures are crucial in shaping expectations around Federal Reserve monetary policy, particularly with regard to the anticipated rate cuts this year.

The Fed has been under increasing pressure to ease monetary policy amid a slowing labor market. In early October, the Bureau of Labor Statistics is set to release the September NFP report. This will be the second month in a row where market participants are expecting a decline in job growth, following a similarly soft August report. According to FactSet data, the median estimate for September NFP stands at 145,000, significantly lower than the 254,000 actual figure recorded in September. This trend has contributed to the growing market belief that the Fed will reduce interest rates at its meeting on September 17.

Beyond the immediate rate-cut expectations, JPMorgan’s analysts are also focusing on the October NFP and unemployment rate data, scheduled for release later in the month. The median forecast for October NFP stands at 117,500, which is the lowest estimate since April 2024. Additionally, this number would fall below the 12-month average of 203,200, signaling a potential slowdown in employment growth. For the unemployment rate, the median estimate is 4.1%, matching the previous month’s figure but exceeding the trailing 12-month average of 3.9%. These data points could serve as further evidence of a cooling labor market, which may reinforce the case for continued Fed easing in the coming months.

Historical trends offer further context for these expectations. Over the past 12 months, NFP figures have exceeded estimates 7 times and fallen short 5 times, averaging a 15% overperformance. Over a five-year horizon, the actual NFP has exceeded forecasts 67% of the time. The wide spread of October’s NFP estimates—ranging from 75,000 to 180,000—also suggests a high degree of uncertainty, underscoring the potential for market volatility in response to the actual data. For the unemployment rate, the historical spread has been narrower, but the persistence of the 4.1% estimate indicates a lack of consensus on a significant deviation.

The broader implications of these data points extend beyond the U.S. equity market. Global investors are closely monitoring the Fed’s actions due to the central bank’s outsized influence on capital flows. In a separate report, the International Monetary Fund (IMF) projected that global inflation will cool to 4.3% by the end of 2025, with advanced economies leading the decline. The U.S., in particular, is expected to see inflation fall from 2.6% in 2024 to the 2% target in 2025. While the IMF forecasts a moderation in inflation, it also anticipates a slower pace of economic growth in the U.S. in 2025, citing fiscal tightening and political uncertainty as potential drag factors.

Analysts at JPMorgan argue that a combination of soft labor market data and a favorable inflation outlook could create a “Goldilocks” scenario for equities, with the S&P 500 potentially benefiting from accommodative monetary policy and continued investor optimism. The market’s performance over the past year has demonstrated a resilience to various macroeconomic headwinds, including inflation concerns and geopolitical tensions. If the October data confirms a continued slowdown in job creation, it could amplify expectations for multiple rate cuts in 2025 and 2026, further boosting equity valuations.

Investors are advised to remain vigilant as the U.S. jobs data becomes available in the coming weeks. The actual numbers could diverge from estimates, leading to sharp market reactions. In particular, a larger-than-expected drop in NFP or a rise in the unemployment rate could signal a more pronounced shift in the Fed’s policy stance. Given the current economic environment, the interplay between employment data and central bank policy remains a key driver of market sentiment and asset allocation decisions.