Tonight! The first major data is coming—will the "long-awaited" US September nonfarm payrolls bring rate cuts "back into focus"?

After nearly two months of shutdown by the U.S. federal government, the market finally welcomes the September non-farm payroll data. Overnight, the Fed’s meeting minutes released hawkish signals, and coupled with no release of October non-farm payroll data, traders have nearly abandoned expectations for a December rate cut. Will this data, delayed by 43 days, bring the December rate cut “back into view”?

The U.S. Bureau of Labor Statistics will release the September non-farm payroll report at 21:30 Beijing time tonight. According to statistics, Wall Street expects 51,000 new non-farm jobs for September, higher than August’s 22,000, but the forecast range spans from a reduction of 20,000 to an increase of 105,000, showing huge market divergence. Unemployment rate is expected to remain at 4.3%, average hourly wage is expected to grow 0.3% month-on-month. Goldman Sachs expects 80,000 new jobs, slightly above market consensus, while JPMorgan predicts 50,000.

Some economists point out that tightening immigration policy and expansion of AI applications are reshaping the labor market from both supply and demand. The economy now only needs to create 30,000–50,000 jobs per month to keep pace with growth in the working age population, much lower than about 150,000 in 2024.

The cooling trend of the labor market has prompted the market to reassess the Fed’s policy path. Although the Fed’s October meeting minutes show many policymakers remain cautious about further rate cuts, economists believe that if September data shows labor market stability or further deterioration, it may still impact the December policy decision.

Notably, this longest government shutdown in U.S. history has forced the Bureau of Labor Statistics to cancel the October jobs report, which will be merged with the November report and released on December 16. This means the Fed will not have November employment data as a reference during its policy meeting on December 9-10, highlighting the importance of September’s non-farm payroll report.

Huge Divergence in Wall Street Expectations: Employment Data Faces Two-way Risks

Market expectations for September non-farm data are highly divergent, with forecasts ranging from a decrease of 20,000 to an increase of 105,000. Goldman Sachs expects an increase of 80,000, higher than the market consensus of 51,000, while JPMorgan expects 50,000, slightly below consensus.

The main support for stronger-than-expected employment data comes from big data indicators.

Goldman Sachs tracked alternative employment growth indicators, which averaged 73,000 in September, reaching 128,000 if excluding ADP data. Goldman’s composite employment growth tracker improved from stagnation in the summer to 85,000 in September, then slowed to 50,000 in October.

Historical revision patterns may also provide support.

August non-farm data has shown a clear tendency to be weaker at initial release. Of the last 15 September employment reports, 12 revised August data upward, with an average upward revision of 38,000. About two-thirds of net revisions are usually completed in the first revision, with a median change of 60,000 after the first and second round of revisions.

However, there are also significant negative factors. Goldman Sachs expects government jobs to decrease by 5,000, with the federal government dropping 10,000 but state and local governments adding 5,000. The federal hiring freeze continuing into 2026 will keep dragging on federal employment. Employment sub-indices in both manufacturing and services surveys fell slightly in September and remain in contraction.

Notably, a set of leading indicators—including “small nonfarm” ADP, job openings, and initial unemployment claims—already reveal labor market weakness:

During the September survey period, initial jobless claims were 232,000, nearly unchanged from the prior value of 234,000. Continuing claims fell from 1.944 million to 1.926 million.

Job openings data is mixed. August JOLTS rose from 7.208 million to 7.23 million, above the expected 7.19 million, but other alternative indicators of job openings declined in both September and October.

The Conference Board’s labor differential—the difference between respondents who say jobs are plentiful and those who say jobs are hard to get—fell by 2.4 points to 8.7 in September, the lowest since February 2021, then rebounded slightly to 9.4 in October.

September ADP private employment report showed a decrease of 32,000 jobs, far below the expected increase of 50,000.

August figures were also revised down from an increase of 23,000 to a decrease of 3,000. The Chicago Fed’s unemployment estimate rose slightly from 4.32% to 4.34%. Revelio Labs’ preliminary September non-farm estimate was 60,100, later revised to 33,000.

U.S. Labor Market Faces Dual Supply-Demand Contraction

The U.S. labor market is undergoing structural changes on both supply and demand sides. On the supply side, reduced immigration is the main reason for shrinking labor supply.

Economists say the number of jobs needed per month to keep up with working-age population growth has dropped sharply from around 150,000 in 2024 to 30,000–50,000. Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, notes:

"The slowdown in job growth mainly reflects changes in labor supply, strongly suggesting a slightly looser labor market overall, though not significantly so."

Unemployment rate data corroborates this assessment. Though unemployment rose in August, it has fluctuated between 4.1% and 4.2% most of this year. This near four-year high level reflects simultaneous weakness on both supply and demand sides of the labor market.

The demand side of labor is facing equally severe pressure. The rapid spread of AI is eroding job demand, especially for entry-level positions, making it hard for new college graduates to find jobs. Economists say AI is driving an “employment-less growth” economic model.

The Trump administration’s trade policies have also created economic uncertainty, weakening hiring by businesses, especially smaller ones. Brian Bethune, an economics professor at Boston College, says:

"The current environment is particularly unfavorable for small and medium-sized businesses, and most job losses we see are coming from these firms. This is a highly polarized economy."

September Data May Still Impact December Rate Decision

Although the September jobs report is now “outdated” data, some economists believe if the data shows labor market stability or continued deterioration, it may still affect the Fed’s monetary policy meeting on December 9–10.

According to a WallstreetCN article, the Bureau of Labor Statistics stated that since it failed to collect household survey data used to calculate October unemployment, the October jobs report has been cancelled, with its data merged into the November report and released on December 16—right after the FOMC’s December meeting.

Analysis points out this means Fed officials will not have the latest employment data at the December meeting, raising the importance of the September report.

Yale Budget Lab Executive Director Martha Gimbel says:

"The Fed is uneasy about further rate cuts. If you see a truly weak report, it might sway the Fed, but it has to be pretty weak."

The Fed’s latest meeting minutes show, “Several (several) people indicated that they do not necessarily think the December meeting is appropriate for another 25 basis points rate cut. Many attendees said, based on their economic outlook, it may be appropriate to keep rates unchanged for the rest of this year.” The hawkish tone from the Fed further dampened expectations for a December rate cut.

Meanwhile, the Bureau of Labor Statistics says it will not release an October non-farm report, but will fold that data into the November report. After the news, investors believe chances of a December Fed rate cut are lower, as the official data delay may deepen division among decision-makers. Bond traders have virtually abandoned bets on a December rate cut.

Goldman Sachs FX strategist Karen Fishman also points out, the next non-farm payroll report will be released after the Fed meeting, meaning the market may underestimate the importance of the September data, but as the only available official employment indicator, it will still significantly impact market sentiment.

Weaker-Than-Expected Data May Rekindle Recession Risk

Goldman Sachs senior markets adviser Dom Wilson notes the upcoming non-farm data is asymmetric: weak data will be seen as proof the job market is already weak, but strong data will only provide limited reassurance, since several more recent October data points are weak.

He believes data weaker than expected, especially rising unemployment, will intensify concerns about the labor market and may reignite recession risk.

With wide divergence in jobs data forecasts, Wall Street banks’ pricing of market reactions after the release is also asymmetric. JPMorgan’s market intelligence team forecasts market reactions to different data outcomes show a “barbell-shaped” distribution:

If new jobs rise above 100,000, S&P 500 index will be flat to down 1.5%, with a 5% probability;

Between 70,000–100,000, index will fluctuate within ±0.5%, 25% probability;

Between 30,000–70,000, index up 0.5%–1%, 40% probability;

Between 0–30,000, index up 0.25%–0.5%, 25% probability;

Below 0, index flat to down 1%, 5% probability.

At the same time, options market is pricing about 2% volatility for contracts expiring November 3, though this may also include premium from Nvidia’s earnings report.

JPMorgan traders believe results in line with forecasts are the “Goldilocks” scenario, sufficient to dispel growth slowdown worries, but not enough to reignite inflation concerns.

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