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September non-farm payrolls preview by the numbers: Beware the seasonal sample

  • Consensus estimate +140K
  • Estimate range +70K (Citi) to +220K (Jeffries)
  • August was +142K
  • Private consensus +125K versus +118K prior
  • Unemployment rate consensus estimate 4.2% versus 4.2% prior
  • Prior participation rate 62.7%
  • Prior underemployment U6 7.9%
  • Avg hourly earnings y/y exp +3.8% versus +3.8% prior
  • Avg hourly earnings m/m exp +0.3% versus +0.4% prior
  • Avg weekly hours exp 34.3 versus 34.3 prior

Numbers released so far this month:

  • ADP report +143K versus +99K prior — this was a three-and-a-half year low
  • ISM services employment 48.1 vs 50.2 prior (weak but first back-to-back reading above 50 since late-2023)
  • ISM manufacturing employment 43.9 versus 47.1 prior
  • Challenger job cuts 72,821 versus 75,891K prior — highest two-month period since 2009 (excluding pandemic)
  • Philly employment +10.7 versus -5.7 prior
  • Empire employment -5.7 versus -6.7 prior
  • Initial jobless claims survey week 220K versus 233K prior (lowest reading in survey week since May)

The seasonals are negative with the headline missing 69% of the time and beating 31% of the time, by 92K and 60K respective, according to BMO. However 58% of unemployment rate readings have been lower than expected with 27% matching and 15% above.

The other question is how the market will react. I tend to think that the market is still too long USD but it’s also too long Treasuries. Yield have been climbing higher and a strong number might crush the talk of 50 bps (priced at 35% now). Keep in mind, there will be one subsequent non-farm payrolls report after this one and before the Nov 7 FOMC.

Given that dynamic, I could see USD/JPY particularly strong on a strong jobs report.

A weak headline might not have as large of an effect but a rise in the unemployment rate could, even just to 4.3%.

Overall, I don’t see a big edge or skew setting up ahead of the report outside of bonds.

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