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The September Jobs Report Looms: What The Major Banks Expect

The major banks predict how many jobs the BLS will reveal were added in September. Here are the numbers:

  • Citigroup 175K
  • HSBC 200K
  • Deutsche Bank 200K
  • JP Morgan 225K
  • Morgan Stanley 230K
  • Goldman Sachs 230K
  • BofAML 235K
  • UBS 250K

And here is RanSquawk's summary of the key expectations and notable highlights about the upcoming non-farm payrolls number:

  • US Change in Nonfarm Payrolls (Sep) M/M Exp. 215K (Low 155K, High 265K), Prev. 142K, Jul 212K
  • US Unemployment Rate (Sep) M/M Exp. 6.1% (Low 6.0%, High 6.2%), Prev. 6.1%, Jul 6.2%.
  • Recent labor data signals a pick-up in the headline after job creation unexpectedly slowed last month
  • Participants will be looking at real wages for signs the labor market is strengthening beyond the unemployment rate

Recent labour data out of the US has indicated that today’s NFP will likely show a rebound after unexpectedly slowing last month, although with Fed QE almost certainly set to end this month, this jobs release is unlikely to delay the end of bond buying. However, at the present time, the FOMC appears to be in a current state of change where they are moving away from time dependent forward guidance and are now more data dependent when it comes to the first rate hike. As such, it would likely take a number of disappointing NFP releases and other weak labour data to see the Fed push back timing of the first hike.

Most recent data has been relatively positive with Wednesday’s ADP release, which is often viewed as a strong indicator for NFP, relatively in line with expectations at 205k and the initial jobless claims 4-week average continuing to track below 310K. One side note however is that the Birth/Death ratio in September is often a drag on the headline figure with 2013 showing a drag of 30K, 2012 a drag of 14K and 2011 a drag of 26K.

In recent months the Fed’s narrative on the labour market has been that the labour market is continuing to improve but slack still remains. Once again, initial focus will be on the headline figure, however participants will also be looking for any signs of a pick-up in real wage growth showing improvement not just in the number of people in full or part-time work, but in quality of the labour market.

Market Reaction

As is usual for the release of NFP, any out-of-line reading for the headline will likely see a fast-money move with a beat on expectations likely supporting equity markets and the USD however weigh on gold and treasuries as flows move into riskier assets. However, any large beat could also bring forward expectations of a rate hike from the Fed and equities could pull off best levels with Eurodollars coming under pressure and curve steepening observed. If the main components are broadly in-line, focus could again turn to the Average Hourly Earnings component of the report as the Fed identified that slack remains in the labour market. If hourly earnings are higher than expected then the report could be seen as supporting the more hawkish members of the Fed who are calling for a rate hike.