Technical Analysis

October non-farm payrolls preview: By the numbers

  • Consensus estimate +200K
  • Private +200K
  • September +263K
  • Unemployment rate consensus estimate: 3.6% vs 3.7% prior
  • Participation rate prior 62.3%
  • Prior underemployment U6 6.7%
  • Avg hourly earnings y/y exp +4.7% y/y vs +5.0% prior
  • Avg hourly earnings m/m exp +0.3% vs +0.3% prior
  • Avg weekly hours exp 34.5 vs 34.5 prior

Here’s the October jobs picture so far:

  • ADP employment 239K vs 195K expected
  • ISM manufacturing employment 50.0 vs 48.7 prior
  • ISM services employment 49.1 vs 53.0 prior
  • Challenger Job Cuts of 33,843 vs 29,989 prior
  • Empire Fed employment 7.7 vs 9.7 prior
  • Initial jobless claims survey week 214K vs 233K a month ago
  • September JOLTS 10.717m vs 10.053m expected

BMO notes that seasonally the headline payrolls print has a tendency to outpace forecasts in October coming in above estimates 52% of the time and missing 48% of the time by 71k and 39k, on average. Just 16% of previous unemployment rate readings in October have been higher than expected, 48% have been better-than-estimates and 36% have matched forecasts.

Today, the White House said it expects jobs gains of 150,000 per month in the coming months, which is an oddly specific number.

In terms of trading, we’re undoubtedly in a good-news-is-bad-news environment and a strong number would hurt stocks and short-dated bonds. In terms of FX, a strong report risks setting off another round of broad US dollar gains. Fund managers already say that’s the most-crowded trade in the world but of the 6 major central banks that adjusted policy in the past 8 days, the only one that was incrementally hawkish was the Federal Reserve.

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