U.S. layoffs plunged 71% in October! With the nonfarm payrolls test approaching, the market is re-examining the endpoint of the Federal Reserve's rate hikes.

The U.S. nonfarm labor market continues to show a resilient pattern of "low layoffs, cautious hiring expansion." In October, companies announced 43,994 job cuts, down 71% year-over-year, the lowest for the month of October since 2023; hiring plans totaled nearly 445,000, up 57% year-over-year. However, the increase in hiring came entirely from preparations for the holiday shopping season, and some announcements were delayed from September to October, which is why economists did not use the data to conclude that long-term labor demand has strengthened across the board. The sharp year-over-year drop in layoffs also reflects the impact of an unusually high base in the same period last year, as companies, swept up in the AI agent frenzy, still prefer to meet business expansion needs through some temporary positions while actively controlling long-term labor costs. Friday's nonfarm payrolls report will test this employment resilience. The market expects October nonfarm payrolls to increase by 65,000 and the unemployment rate to hold at 4.2%; both Goldman Sachs and Bank of America forecast an increase of 75,000, slightly above consensus, and both also expect an unemployment rate of 4.2%. Goldman Sachs expects average hourly earnings to rise 0.3% month-over-month; Bank of America believes job growth remains above the level needed to keep the unemployment rate stable. The judgments of both institutions point to moderate employment expansion, and Wall Street has not yet priced in the possibility of a recession-like deterioration in the job market. For stock and bond markets, the key is whether employment can continue to support household income and corporate earnings while wage pressures ease moderately and align with overall inflation improvementthat is, moderate job growth, a stable unemployment rate, moderately slower wage growth, and continued decline in overall inflation. This "Goldilocks"-like combination of economic data will affect the market's judgment on how much more the Federal Reserve needs to raise rates and when it will stop, and it also matters for whether U.S. stocks can gain the dual impetus of earnings support and valuation recovery. Holiday shopping season hiring heats up, companies still retain workforce flexibility The number of layoffs announced by U.S. employers fell to the lowest level for any October since 2023; at the same time, hiring plans increased as companies began preparing for the holiday shopping season. According to data from U.S. outplacement firm Challenger, Gray & Christmas Inc., companies announced 43,994 job cuts last month, down 71% year-over-year. In the same period last year, announced layoffs hit the highest level for any October in more than two decades. Challenger data showed that employers also said last month they planned to hire nearly 445,000 workers, up 57% year-over-year, the highest level for any October since at least 2009. The increase was driven entirely by companies staffing up for the busy holiday shopping season. Amazon.com Inc. plans to hire 300,000 workers, accounting for nearly two-thirds of total seasonal hiring plans. The report showed that United Parcel Service Inc. also announced plans to hire 100,000 workers. At the same time, Challenger noted that the timing of seasonal hiring announcements has shifted from September to October. Temporary holiday staffing has also become more concentrated: only five companies announced seasonal hiring plans this year, compared with 11 in 2025. Andy Challenger, the firm's chief revenue officer, said in a statement: "Employers hiring seasonal workers are staggering announcement timing and waiting longer to see how the shopping season shapes up before locking in headcount. They aren't cutting heavily, but they aren't committing to long-term staff either. Seasonal roles give companies the labor they need for the holidays with a built-in end date." The layoff and hiring plan data highlight a labor market with few layoffs but also limited job opportunities. The government's October employment report due Friday is expected to show nonfarm payrolls rose by 65,000 and the unemployment rate held at 4.2%. The top reason employers cited when announcing layoffs last month was business conditions amid markets and persistently high inflation, which has replaced artificial intelligence as the main driver of layoffs this year. Recent employment data show that some employers remain cautious about expanding headcount amid high costs. Employment resilience underpins growth, Wall Street still divided on the endpoint of Fed rate hikes Fewer layoffs help stabilize household income and consumption and allow the Federal Reserve to keep its focus on inflation. On October 28, the Federal Reserve kept rates at 3.75%4.00%, noting strong economic activity, robust capital investment, and job growth matching labor supply; two FOMC members favored a rate hike. Goldman Sachs expects December to be the last hike of this cycle; JPMorgan also expects a 25-basis-point hike in December but does not believe a sustained hiking cycle will follow, with its focus on energy and import price pass-through that could still keep core inflation firm. Bank of America is more hawkish: it expects 25-basis-point hikes in December this year and March next year, bringing rates to 4.25%4.50%, and expects them to remain there until the end of 2027. From a market pricing perspective, the combination of moderate job growth, a stable unemployment rate, and slightly cooling wage pressures is most favorable for balancing corporate earnings with an overall valuation recovery in the stock market. If consumer demand continues to be supported, the need for further tightening may decline. That is, moderate job growth and a stable unemployment rate help sustain household income, consumer demand, and corporate earnings; moderately slower wage growth helps ease inflation pressure and, with overall inflation improving in tandem, moderates expectations for further rate hikes, supporting a recovery in equity valuationssuch a "Goldilocks-style" macroeconomic combination is more conducive to driving earnings growth and valuation improvement in tandem. If employment and wages both significantly beat expectations, rate hike expectations and Treasury yields could rise again, weighing on tech stock valuations. The nearly 445,000 hiring plans represent companies' hiring intentions and are highly seasonal; nonfarm payrolls measure the net change in actual employment and are seasonally adjusted, so the two cannot be directly mapped to each other. What will determine Friday's trading direction in the nonfarm payrolls report details will be the combination of growth and inflation presented by jobs, wages, and prior-month revisions.