The October NFP number is expected to bounce back when released on Friday, after the -33k ‘hurricane season’ number recorded for September
The September NFP (non-farm payroll) number was forecasted to be poor, due to the various hurricanes and tropical storms, which battered certain parts of the USA in September. Analysts and investors were therefore not shocked, when the number missed the forecast; coming in at -33k for the month. The first negative reading recorded since the Great Recession years caused mass redundancies in the USA. The impact on FX and equity markets, when the September NFP figure was published was benign, as most traders already priced in the low number and dismissed it as a one off, outlier, calendar event. October’s print, published on Friday, is expected to reveal a significant bounce back.
Analysis of recent employment related data provided by other resources, would appear to support the view (amongst the economists’ polled), that the NFP number will come in above 300k at 312k, which will represent one of the highest numbers recorded in recent years, but needs to be measured in context as an average, to cover the lost jobs not created in September. The ADP jobs number is often regarded as a portent for the NFP numbers, it came in at 223k on Wednesday, beating the 200k forecast. Whilst the jobless claims reported (for the week up to October 21st), also beat forecast, coming in at 233k, with the continuous claims number remaining around a 1900k figure for some time, printing an 1893k figure for the week. Challenger job loss numbers fell in September, unemployment is near multi decade lows at 4.2%, whilst YoY wage increases have improved to 3.2%. The JOLTS figure is the monthly survey conducted by the Bureau of Labor Statistics, JOLTS data for August was published on October 11th, and job openings remained unchanged at 6.1 million as of the last business day in August, close to the all-time high of 6.2 million openings reported in July.
NFP day doesn’t necessarily create the market fireworks witnessed in previous eras. During the Great Recession years, the volatile number created equal volatility in the FX markets and would consequently impact the main U.S. equity markets, investors also focus on the unemployment reading published on the same day. However, due to September’s outlier figure, with the expectancy that October’s number will bounce back to indicate strong jobs growth in line with a strong economy, a major miss of the forecast may cause doubts regarding the ability of the job market to bounce back. Conversely, recovering the lost jobs inside such a short period of time, would indicate just how strong the foundations are in the USA economy. That quick recovery from the hurricane season, may have been illustrated by the most recent GDP numbers, which also beat the forecast, lowered due to the impact of hurricane season; annualized GDP in Q3 came in at 3%, beating the forecast of 2.6%, only marginally lower than the 3.1% figure recorded for Q2.
KEY RELEVANT ECONOMIC DATA FOR THE USA ECONOMY
• GDP growth rate 3%.
• Inflation rate 2.2%.
• Interest rate 1.25%.
• Government debt v GDP 106%.
• Unemployment rate 4.2%.
• Labor participation rate 63.1%.
• Challenger job cuts 32,346.
• Wage growth 3.2%.
• Personal savings rate 3.6%.
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