Morning Brief – Non-farm payrolls preview

Market was in a calm mood this morning ahead of the Non-farm payrolls job report for the month of September which is likely to set the trading tone for the next few days at least.

A strong report will push up rate expectations and prolong the rate hiking cycle while a soft reading will kick off another ‘Fed pivot’ trade. It’s a very fine line that will depend on headline jobs, unemployment, and earnings metrics.

Looking at the consensus estimate from analysts they are expecting 250,000 jobs to be created today. This is above what most major banks are predicting.

In August 315,000 jobs were created so there is a clear downtrend going on. The Unemployment rate consensus estimate is 3.7% vs 3.7% during the previous month.

Average hourly earnings year on year are expected at +5.1% against +5.2% prior. Average hourly earnings month on month +0.3% versus +0.3% last month. Average weekly hours are expected to come in at 34.5 vs 34.5 prior.

Goldman Sachs bank analysts have a consensus estimate today for a headline estimated at +200,000. They also expect today’s jobless rate estimate is 3.7%

The highest bank analyst estimate I have seen is from BNP Paribas at 315,000. Société Générale bank project a 280,000 gain this month which is also on the higher side.

The bank analysts also expected the unemployment rate for September is expected to decline to 3.6% if they are correct then the market would likely sell off as the Fed would probably be emboldened to hike aggressively.

According to BNP “If there are no returnees, or if there is a net exodus from the labour force rather than re-entrants, the unemployment rate could drop even more than the 3.6% we project.”

They also noted “Wages are expected to rise 0.5% MoM in September. We view the shortfall seen in August, when wages rose 0.3%, as noise in the data rather than the beginning of a new trend.”