The 12,000 October establishment survey print included a lot of hurricane-related noise, but it compared with an estimate of 100,000. The two prior months were also revised down by a total of 112,000, which cannot be explained away by weather. It’s also likely why Treasuries initially rallied, opines Peter Boockvar, editor of The Boock Report.

The 10-year yield fell 9 basis points post-release and the 2-year yield dropped by 14 bps. The household survey was likely also a reason for the rally in Treasuries and drop in yields as jobs lost there totaled 368,000. There was also a 220,000 fall in the size of the labor force. That followed gains of 430,000 in the month before in employment and 150,000 in the labor force size. Thus, the unemployment rate held at 4.1% for the wrong reasons.

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Clouding this all was the “Not at work due to bad weather” figure, which totaled 512,000. That was the most since a major snow storm years ago. BUT as they still remained EMPLOYED and collected paychecks, it was NOT deducted from the household survey calculation. The all-in unemployment rate held at 7.7%.

Average hourly earnings were as expected when including revisions and the year-over-year gain was 4%. That compares with the pre-Covid pace of 2.5%. Hours worked ticked up by one tenth to 34.3, still hovering around multi-year lows, not including Covid.

Bottom line, the weak household survey this month, after a strong September, is what we should be looking at. That’s because it looks past the weather/strike influence and it is in exact contrast to what ADP said, which looks past it, too.

The market is fully pricing in a Fed cut this week. But with all the confusing data out there, and after cutting 50 bps in September, I would think proper risk management should lead to NO RATE CUT. It’s something they can always revisit in December. Yet if this softer household survey data is repeated next month, the Fed should feel more comfortable in cutting again.

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