What Happens when Jobs Data Collides with Layoffs and a Shutdown?

Mary MacNamara and Jose Torres unpack a volatile week: strong ADP jobs data, historic Challenger cuts, and shutdown uncertainty. Plus, gold’s technical signals and what they mean for investors.

Mary MacNamara  

Hello everybody and welcome to Cents of Security. I’m here with Jose Torres, the Senior Economist at Interactive Brokers. Hello Jose. How are you?

Jose Torres  

Hi, Mary. Great to be here. Doing well. How are you?

Mary MacNamara  

I’m doing great. So, tell us, we have so much information this past week, right?

Jose Torres  

Yeah,

Mary MacNamara  

Start out with jobs.

Jose Torres  

Sure. Yeah, so the employment data, first we got ADP with a pretty strong number 42,000, beating the expected 25,000 and recovering from September’s 29,000 position worker loss. But then that there was enthusiasm that the economic cycle was reaccelerating and that really drove stocks higher as well as interest rates because that firm employment number supported stronger corporate earnings but also dismissed the idea of multiple rate cuts in upcoming meetings. So, for that reason, the market did well, and treasuries did not do well. Rates increased. However, the next day we got news from Challenger that October job cuts were the most since 2003. And the same morning we got Revelio Lab data saying that October, we saw a worker loss payroll reduction of 9,000.

So those two negative developments really outweighed the positive development from Wednesdays, November 5th, ADP report and markets have been bearish ever since. November 6th was a red day. Today on November 7th, we’re also having a red day. Markets are worried that the government shutdown is extending while at the same time the labor market is having some trouble. Of course, federal, a lot of federal workers aren’t being paid, but also vendors and contractors are missing out on their revenues. And don’t forget the general frustration and the inconveniences that suppresses overall attitudes and consumer spending.

Of course, airports traveling, that’s a problem that’s starting to weigh on people as it starts to weigh on the constituency, that really pressures both political parties in one way or another to try and get a deal done. And this morning we’re seeing that the government shutdown contract for November 14th.

The Yes in turn which represents the shutdown, the government reopening by November 14th. That’s up sharply. It’s up to 60% today. It was at around 40% just yesterday, November 6th. In terms of the government opening by November 21st, that’s an 83% chance. So, our prediction market participants are pretty confident that the shutdown will end in the next few days or weeks.

The prediction market has been particularly useful in terms of displaying accurate probabilities on what’s going to occur. We saw that this week as well with the New York City mayoral election and the Governor elections in New Jersey, as well as Virginia. Also Proposition 50. Our prediction market here at interactive Brokers ForecastTrader essentially called all the races for the Democrats. Prior to the races, a few hours before or a few days before, there was speculation that maybe Ciattarelli in New Jersey was going to come out victorious and pull out an upset. There was also speculation that due to early voting in New York City, that former state Governor Andrew Cuomo could do better than what numbers and probabilities were implying.

But it turned out that the prediction markets didn’t really take that information wholly into account. You saw Mamdani’s odds only drop marginally from roughly 90% down to 85%. So, our market didn’t really react that much and didn’t drop Mamdani’s chances that heavily, despite the information pointing to Cuomo potentially pulling the upset. Same thing with Ciattarelli and Mikie Sherrill in New Jersey. Mikie Sherrill stated around 82%. That number didn’t really budge much despite some folks thinking that Ciatarelli was going to come out with the upset proposition 50. That was pretty much 99%, a hundred percent priced, that was going to pass.

And then also in Virginia. You had the Governor race and there were high expectations that Spanberger was going to be able to win against Winsome Earle-Sears that was at around 96%. And of course, that occurred so similar to what we saw last year in the 2024 presidential election that our information here at, in our forecast market is particularly strong and offers a.

Accurate representation of what’s likely to occur. We see that when we’re looking for information on probabilities, we have a long list of places to go, but we can see that with our platform. You can see the accurate possibilities and what the numbers are saying eventually comes true. We’re happy to see that that it’s doing its job in being able to predict elections weeks before the actual day.

Mary MacNamara  

How’s gold doing?

Jose Torres  

Gold has been improving. It’s climbing today on some safe haven demand. Just going to pull up a chart real quick.

Gold is hovering at around 4,000. Of course it’s 52. Week high was 4381. Made somewhat of a double top pattern or even a triple top really.

Mary MacNamara  

And, remind our listeners what that means.

Jose Torres  

So, essentially the Gold Bulls were trying to get the price above 4,400 announced. They failed on October 16th. They failed on October 17th. They failed on October 20th. So that’s a triple top because essentially the bulls are trying to get it past a 4,400 level, but for whatever reason, it’s facing resistance and withdrawing from that retreating rather from that level towards a lower level.

Once it happens twice, usually a double top that’s known as a technical signal that, hey, it’s probably time or could be time for a breather because the price action is failing to breach this level, of course, a triple top that adds further evidence to the potential for a near term pullback.

And then of course, you could have triple tops and quadruple tops, but then the price keeps going higher. But technical analysis, those are the clues that, investors and traders can some one of the few tools that investors and traders can use to their advantages. And an obvious one really, oh, why isn’t it passing a particular price? Why is it having trouble at 4,400? Okay, then maybe it’s not time to add long exposure there, or maybe it’s time to add some short exposure.

Mary MacNamara  

Wasn’t there an ISM report last week? What happened there?

Jose Torres  

Two ISM reports manufacturing still in contraction orders, having trouble with high interest rates, elevated prices and tariffs. So, purchases have been down there manufacturing in the eighth consecutive month of contraction. According to ISM, which is bifurcated information, when you consider the strength that S&P Global’s PMI has been reflecting on the US manufacturing sector in the last few months, that latter survey has been stronger.

But in services, the S&P Global and the ISM numbers have been uniform and they’ve been pointing to a stronger economy with firm consumer spending and higher services inflation. As a result, businesses have pricing power. Consumers have money they want to buy. And businesses are fine raising their prices in the services sectors.

Employment though was actually also weak in ISM services. So you have admin manufacturing for that matter. So, you had two ISM surveys point to employment weakness, Revelio pointing to employment weakness, Challenger pointing to employment weakness. And of course, those four taken together were able to offset the enthusiasm.

We’re seen after ADP’s employment report, which actually signals strong conditions. And that’s part of the reason why stocks have been doing poorly this week and why gold is catching a bid today. And really the tug of war recently has been around the 4,000 level. Bulls are trying to take it back above that level in a decisive way.

So that, arguably they can try again at 4,400. But the other safe haven, Bitcoin is also doing terrible lately, actually even falling below its pivotal support level at 100,000 including today on October 7th. In fact, it’s right now at 100,800. Folks are going to be watching the 100,000 level seriously, because if you get a break below that level, you know that’s going to trigger some selling.

And folks saying I don’t want to, I don’t want to own it below a hundred thousand. If it trades above a hundred thousand again, then maybe I’ll consider riding it from a hundred higher, but from a hundred below. I don’t want to own it. And there’s likely going to be, if you have a break, a significant break below a hundred thousand there’s likely going to be a lot of people and institutions that see that there could be much more selling pressure in the future and don’t want to own it at this juncture.

Mary MacNamara  

We also had some news in the Supreme Court this week. They started to talk about tariffs. Can you tell us about that?

Jose Torres  On Wednesday, November 5th, there was a Supreme Court hearing where justices are debating whether President Trump’s tariffs are going to be allowed or not. We immediately saw that after some of the more conservative judges; they were argumentative against the president’s authority to implement tariffs in a broad way. Upon their skepticism, in our prediction market, we saw the odds fall of the Supreme Court upholding President Trump’s tariffs. They were up to 48% that they would allow them. That went down to a low of 21%, and now it’s at around 28%, 30%. The GOP appointed six out of three justices. So, you know, the institution, does have a tilt in one direction, but the arguments from some of those conservative judges, really decreased the probability that the tariffs will be allowed. In fact, it elevates the chances that there will be some refunding going on at the Treasury. Of course, the White House is saying that if they can’t, if they aren’t successful with the Supreme Court, they have additional paths that they can take to try to maintain broad-based tariffs.

Mary MacNamara  

All right, so what do you think is happening next week?

Jose Torres  Yeah. So we’re going to get the ADP weekly numbers on Tuesday. We got the monthly on November 5th, so they’re going to be doing the on weeks where they don’t do the monthly, they’re going to be doing the weekly. So that’s what we have from the data perspective and also the weekly

Mary MacNamara  What about Challenger Revelio? Are they going to be next week also?

Jose Torres  Revelio won’t, but Challenger Will Challenger will have some data next week. So, we’ll be watching that. We’ll be hoping that the government shut down ends. The airports are now becoming problematic prior to the holidays, and we could use a little bit of an acceleration here in the short run. If we reopened the government that’ll boost economic activity in the short run going into the holidays. And we could still finish off this year pretty strongly from a consumption perspective, but if we go into the holidays, into Thanksgiving with the shutdown on, I am really afraid of the economic slowdown potential that could occur in the next few months heading into next year. We won’t be starting next year, 2026 on the right foot. If the government shutdown isn’t resolved soon that’s an a critical risk that I am paying attention to and so is the bond market. We saw yields rise on that strong ADP report, but then they fell right back the next day.

And that’s what folks are worried about. They’re worried that the labor market slowdown is going to become more pronounced, and that consumer spending. Is not going to hold up considering that for the last few months it’s been more the wealthier households that have been driving it. Whereas the middle-class households and the lower income households have been struggling with high inflation and a lack of job availability.

So those are some critical things that we’ll be watching.

Mary MacNamara  

Excellent. Let’s hope this shutdown ends. At least that’s my opinion. I hope it does.

Jose Torres  

Absolutely. I have some travel too. I have some travel soon too that’ll be I may have to cancel it even

Mary MacNamara  

You got Thanksgiving’s coming up. We got the holidays and I’m sure there’s rumors right now even about spending right for the holidays. But we’ll get into that later. The anticipation as, is this going to be a big holiday for retailers,

Jose Torres  

Yeah every day that the shutdown goes on, I will tell you that the prospects become more dim about it being a favorable shopping season in terms of revenues and transactions. That’s just when you have the big, about 700,000 federal workers furloughed right now. Them not getting paid, the ones that are working, and that really has effects across the entire economy.

Also, the vendors and the contractors, that, that depend on the government for revenues. It’s, there’s a risk that this can spread. It’s already spreading. You’re seeing more, you’re hearing more about margin compression on earnings calls, where firms are having to essentially try to trim, cost or cut locations in order to maintain their profits.

Whereas, because they don’t feel comfortable raising their prices. They think that shoppers will walk away and they’ll lose out on those sales if they raise their prices in a rising cost, input cost environment. So we’re hearing that a lot from the consumer names Chipotle, Target, Starbucks, a few other ones in terms of what they’re doing.

We’ll also be getting some more earnings, so we’ll be listening in on into those as well.

Mary MacNamara  

Okay, great. Thank you so much, Jose Torres, our awesome Senior Economist at Interactive Brokers. Thank you.

Jose Torres  

Thanks for the kind words.