Shutdown: Is Friday’s October 3 NFP Report at Risk?

The shutdown that began on October 1 in the United States could disrupt the release of key economic data. The highly anticipated jobs report (NFP), scheduled for October 3, may be suspended or delayed if the federal government remains closed. This uncertainty could weigh on financial markets already seeking clarity.

The fourth trading quarter began this week, and investors are projecting October’s trend as the S&P 500 delivered a solid bullish performance in Q3. First-tier fundamentals are driving the major market moves, particularly those affecting the Federal Reserve’s monetary policy outlook.

As every first Friday of the month, the US labor market report (NFP) is scheduled for this week, Friday, October 3. This macroeconomic figure is the dominant fundamental driver of the week. Let’s recall that the Fed cut the federal funds rate in September as the US economy created almost no jobs in the past five months.

1. The US labor market has been slowing significantly since the beginning of the year, with the Fed’s alert threshold set at 4.5% unemployment

The main chart (top of page) shows the US unemployment rate, which is trending higher. In its latest macroeconomic projections, the Fed indicated that its unemployment “alert level” is 4.5% of the labor force.

Friday’s NFP (October 3) will update this unemployment rate, currently at 4.3%. Any uptick would significantly increase the probability of a jumbo Fed cut at the October 29 monetary policy meeting.

The charts below (source: Bloomberg) illustrate the gradual deterioration of the US labor market:



2. At this stage and before the NFP, the probability of a jumbo Fed cut on Wednesday, October 29 is minimal

A jumbo Fed cut means lowering the federal funds rate by 50 basis points (0.50%). Only further deterioration in the labor market revealed in the October 3 NFP report could raise the probability of such a scenario.

The table below, from the CME Fed Watch Tool, shows the implied probability of Fed action at its upcoming policy meetings:






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