Published Friday, October 30, 2026, after the Fed’s October hold and the Microsoft, Alphabet and Amazon reports, looking ahead to the week of November 2.
Our thesis: next week has two big votes. Tuesday’s midterm elections will get the headlines, but we think Friday’s October jobs report will matter more to the price of money. The U.S. economy is growing fast while hiring has nearly stalled, and the Federal Reserve has told us it is waiting for more information before it decides whether to raise rates again in December. The jobs report is the biggest piece of that information.
The week that set this up
On Wednesday the Fed held its target range at 3.75% to 4.00% by a 10-2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both preferring a quarter-point hike. The statement upgraded the economy to “expanding at a strong pace,” said “inflation remains elevated,” and said “the accumulation of more information” would guide the next move (Federal Reserve). Reuters described the hold as delaying any change until after the midterms (Reuters via StreetInsider).
On Thursday the data backed up the Fed’s upbeat view of growth and its worry about prices. Real GDP rose at a 3.4% annual rate in the third quarter, up from 2.2% in the second, and final sales to private domestic buyers grew 4.9% (BEA). The September PCE price index, the Fed’s preferred inflation gauge, rose 3.6% from a year earlier. The 10-year Treasury yield slipped to about 4.96%, and futures priced a more than 77% chance of a quarter-point hike in December, according to CME FedWatch (CNBC).
The same day, Alphabet fell more than 12% after its results, and Reuters reported that S&P 500 third-quarter earnings were on pace to rise 31% with about half of companies reported (Reuters via Investing.com). The AI story is not our subject today; the point is that the economy around those companies is running hot.
The puzzle: strong growth, weak hiring
Here is the part that does not fit. In September, the economy added just 29,000 jobs, after an average monthly gain of 45,000 over the prior 12 months, and the unemployment rate was 4.2%, within a 4.1% to 4.3% range since March (BLS). CNBC noted that economists had expected 84,000 and that revisions cut 60,000 jobs from July and August (CNBC). One strategist quoted by Reuters this week put it plainly: “the missing piece of this strong economic growth narrative is the lack of job growth.”
There are two stories that explain this, and they point in opposite directions. In the first, companies are getting more output per worker, helped by heavy investment in technology, so growth does not need many new hires. Fed Chair Kevin Warsh said productivity growth is strong and capital spending is at a historically high share of GDP (press conference transcript). In the second, hiring is the early crack, and the strong growth numbers are looking backward. The jobs report is where those two stories collide every month.
Illustrative example, not real data.
Imagine a bakery that sells 10% more bread this year with the same staff because it bought a faster oven. Sales grow, hiring does not. A second bakery sells 10% more only because of a holiday rush, and its owner has stopped hiring because she expects a slowdown. This month both look the same; only the next few months tell them apart. The numbers are made up to show the idea.
History: elections make noise, the Fed sets the price
1994. The Fed began raising rates in February 1994 and roughly doubled its policy rate within a year, surprising the bond market badly. That November, Republicans won control of both the House and the Senate, a historic political shift. Yet investors remember 1994 for the bond-market shock, not the election.
2018. Democrats won the House in November 2018 while Republicans kept the Senate. The bigger market event came after: the Fed raised rates again in December, and the S&P 500 fell close to 20% from its September peak to its Christmas Eve low, amid trade-war worries. The election result was absorbed quickly; the rate path was not.
2022. Two days after the November 2022 midterms, a cooler-than-expected inflation report sent the S&P 500 up about 5.5% in one day, one of its best days in years. The data release about inflation, and what it meant for the Fed, moved markets more than the vote count did.
Jobless recoveries. After the 1990-91 and 2001 recessions, the economy grew for long stretches while hiring lagged, which is why economists coined the phrase “jobless recovery.” Growth without hiring has happened before and can last, but it brings nervous debate about which story is true.
What is different this time
Unlike 2022, the Fed is not trying to cool a labor market that is too hot. Hiring is already slow, yet inflation is still high, with energy prices adding pressure. That makes a weak jobs number harder to read than usual: it could cut December hike odds, or it could be dismissed if inflation stays high. And the midterms do carry real sector stakes this year. Reuters reported that investors are watching for pushback on data centers over energy costs, and that defense, healthcare, banks and crypto could be sensitive to the result (Reuters via Investing.com).
What we watch next week
- Tuesday, November 3: the midterms. Not just who wins Congress, but state and local races that touch data-center power and permitting, which Reuters flagged in Texas and elsewhere.
- Through the week: labor clues. JOLTS job openings and the ISM manufacturing and services surveys (J.P. Morgan week-ahead calendar via Finvaulta), plus Fed speakers now that the post-meeting quiet period is over.
- Friday, November 6: the October jobs report. Payrolls, revisions to prior months, the unemployment rate and wage growth. With revisions this large, we read the three-month trend.
- Earnings. Apple reports Monday, and AMD, Qualcomm and Palantir are also due, among more than 100 S&P 500 companies, per Reuters.
How we see the future
Good case. The election passes without a surprise, hiring picks up modestly, wage growth stays calm and inflation data cool. The strong-growth story looks like productivity, and markets start to question whether December’s hike is needed at all.
Likely case (our view). The election produces headlines and some sector moves, then fades within days. The jobs report is soft but not alarming, and inflation stays too high for the Fed to relax. December hike odds stay high, yields stay near recent levels.
Bad case. Payrolls turn negative or revisions pile up while inflation stays elevated. The Fed is caught between a weakening job market and sticky prices, the kind of bind that makes every data release a market event. A disputed election adds uncertainty.
What would change our mind. We would give the election more weight if results clearly changed the outlook for spending, taxes or data-center rules in ways the market had not expected. We would worry less about the Fed if inflation measures fall while hiring holds up. We would worry more if job losses spread across industries, or if Fed speakers next week push firmly for more than one more hike.
Our take
The midterms will shape the rules for some industries, but the price of money touches every stock, bond and mortgage, and the Fed has told us it is waiting for data. The economy is growing fast without hiring much, and Friday’s jobs report is the next test of which story is true. For the financing side of this story, see The AI build-out now runs on outside money, and the Fed sets its price. This is our opinion for education, not a recommendation about any stock.
Sources
- Federal Reserve, FOMC statement (Oct 28, 2026)
- Federal Reserve, transcript of Chairman Warsh’s press conference (Oct 28, 2026)
- Reuters via StreetInsider, “Fed leaves rates unchanged as it awaits ‘accumulation of more information’” (Oct 28, 2026)
- BEA, GDP (Advance Estimate), 3rd Quarter 2026 (Oct 29, 2026)
- CNBC, “10-year Treasury yield hovers below 5% after strong GDP report, rising inflation data” (Oct 29, 2026)
- BLS, The Employment Situation, September 2026 (Oct 2, 2026)
- CNBC, September 2026 jobs report (Oct 2, 2026)
- J.P. Morgan, “Macro Week Ahead (Week of November 2, 2026)” via Finvaulta (Oct 29, 2026)
- Reuters via Investing.com, “Midterm elections, earnings, jobs data loom for AI-wary market” (Oct 30, 2026)