What To Expect From NFP? - Views From 17 Major Banks

The following are the expectations for today's US September jobs report as provided by the economists at 17 major banks along with some thoughts on the USD into the data release as provided by the FX strategists at these banks.

Goldman: We forecast nonfarm payroll growth of 215k in September, above consensus expectations of 200k by about 0.3 standard deviations of a typical surprise. Labor market indicators were mixed in September, and we therefore expect a print roughly in line with the 212k monthly average seen so far in 2015. We also expect a substantial upward revision to August payrolls. Since 2003, the five industries with the clearest August bias have had an average August deceleration of 40k relative to the prior three months and a subsequent upward revision of 35k. This year, these industries decelerated by a combined 56k, and the deceleration excluding government payrolls was 83k. We expect the unemployment rate to remain at 5.1% in September from an unrounded 5.11% in August, but it’s a close call... At 5.1%, the unemployment rate is currently two­tenths above the FOMC’s estimate of the longer run or “structural” rate.

Morgan Stanley: The release of weak US manufacturing data should not take our focus away from stronger US domestic demand conditions and labour market strength. Our colleague, Ted Wieseman, ranked as the top NFP forecaster by Bloomberg, estimates a 190k NFP rise, which is below the 201k consensus call, but sufficiently strong for the Fed to hike in December. With rates markets underpricing a December hike and given our more risk friendly near-term outlook, we have identified USDCHF longs as the best FX vehicle to play for higher US rates.

RBS: While a consensus-beating 220k payroll number would mark another solid performance for the US labour market, such an outturn may not be strong enough to compel the Fed to act this year. The market impact on data that straddle the consensus may thus come down to the degree of back revisions included in this month’s report and the accompanying average earnings data. The payroll change in August disappointed, but historically the first print for the month has been revised upward by an average of +43k. A similar revision may see a more bullish USD reaction on even a consensus-hitting number than would otherwise have been the case. At the same time, it would also show that momentum didn’t slow in the previous month as much as previously assumed and this makes it more likely that the September number also surprises to the topside. We expect this to play USD positive and see EUR/USD falling on the release. It may also bring with it some GBP outperformance, but we doubt such a result will be enough to see a big outperformance for the USD against EM FX. This may change on a +255k number, as markets have potential to price a faster pace of tightening after the initial lift-off. A significant downside miss may prompt questioning over what impact the China slowdown and the stronger USD are having on the labour market.
Depending on the size of any downside miss, we prefer establishing either short USD/MXN or short USD/JPY exposure.

BofA Merrill: The labor market likely added 190,000 jobs in September, following the recent trend. Based on our forecast, the three-month average will slow to 204,000 but the six-month will increase to 217,000.
The unemployment rate should hold steady at 5.1% while average hourly earnings increase 0.2% mom. This would be the third consecutive solid gain on a monthly basis, therefore translating to a 2.4% yoy rate.
Plugging in a 0.2% mom gain for the remaining months of the year would leave wages up 2.7% yoy in December.

Lloyds: Today’s employment report is expected to show continued tightening of the labour market, with nonfarm payrolls forecast to increase by 200k in September. The unemployment rate is forecast to stay at a 7-year low of 5.1%. This nevertheless is likely to be understating the degree of slack in the labour market, given the low participation rate and high involuntary part-time employment. While wage growth continues to be relatively subdued, we anticipate average hourly earnings growth edging up to 2.4% While a strong data print will see the market move, with the risk overhang we are wary USD gains are likely to be muted.
1.5090 is important support in GBPUSD which has held this week, while 1.1090 is support in EURGBP. The worry would be more if the data surprises to the downside, which risks a greater reaction. Resistance in GBPUSD lies at 1.5225 ahead of 1.5350-1.54 and in EURUSD at 1.1270-1.13 ahead of 1.1385/1.14.

Deutsche Bank: We expect a modest rebound in September nonfarm payroll growth (200k), following a lackluster August gain, which may be revised higher. Recall that we had expected a weak August payroll print going into the report, because. we had noticed a historical tendency for August payrolls to disappoint. In similar fashion, there has been a trend of upward revisions to August payroll gains. This has been the case in each of the last five years as August payrolls have been revised up by an average of 79k...We expect average hourly earnings (AHE) to rise +0.2%, which would have the effect of raising the yearover-year growth rate two tenths to 2.4%. If this is the case, it will mark the highest growth rate since August 2009 (2.4%)...DB sees unemployment rate unchanged at 5.1%.

Nomura: We expect the Bureau of Labor Statistics (BLS) to announce that US nonfarm payrolls grew by a net 190k in September. Job growth has slowed somewhat recently after robust gains over the last year, with the six-month moving average of the change in nonfarm payrolls declining from 282k in February to 205k in August. With the labor market returning closer to “full employment” and the output gap closing, we expect payrolls to grow at a less robust pace over the next several years. Given our expectations for payroll gains to slow somewhat compared with previous trends, we expect the unemployment rate to remain unchanged at 5.1% in September. Moreover, we note that the labor force participation rate remained quite low at 62.6% between June and August, so a rebound to the prior range of 62.7–62.9% could put some upward pressure on the unemployment rate.

Credit Suisse: We project Friday’s payrolls to show +195k jobs in September, up from last month’s +173k, due to strong growth in the construction and service producing sectors. Unemployment is forecasted to remain at 5.1% in line with consensus, while average hourly earnings should increase 0.2% (consensus 0.2%), taking the year over year figure to 2.4%, its highest point since August 2009.

Barclays: We expect, in line with consensus, an increase of 200k in the headline number (190k for the private payroll), a steady unemployment rate of 5.1%, and a 2.4% y/y increase in wages. We see these figures as robust indicators of tighter labor market conditions and supportive of inflation in the months to come.

BNPP: We expect a solid US employment report on Friday, with our economists looking for a recovery in the pace of payroll growth to 200k. We also see a good chance that August’s weaker 173k result could be revised higher, in line with historical patterns for that month. The overall effect should support expectations for Fed tightening to begin in December, if not at the October meeting...With global growth concerns and risk aversion the main obstacles to pricing for rate hikes now, we favour running long USD positions vs. commodity bloc currencies, with these pairs likely to rise if markets move to price in Q4 lift-off or if financial market conditions deteriorate again. Comments from Fed Vice Chair Fischer late Friday will also be important to monitor as he has not spoken publicly since the last FOMC meeting.

SEB: August data was strong enough to give the Fed a reason to hike even though they refrained from doing so. For September, we expect further improvement; unemployment is expected to fall to 5.0% and US employers may have added 220k new jobs. Our conclusion is that we have already passed what the Fed requires of the labour market to motivate a hike Market implications regarding currencies should be smaller than usual as focus has turned somewhat from the US jobs data to developments in China.
However, the largest effects should be seen on currencies with China exposure such as AUD and NZD rather than EUR. Concerning EUR there is a clear pattern for overreactions on the NFP data as EUR/USD tends to change direction on Mondays after NFP releases.

BTMU: The BTMU NFP model is estimating a reading of 185k for today and if coupled with evidence of increased wage growth would certainly be viewed as another impressive NFP report. We expect to see clear evidence of strengthening wage growth in today’s report. So perhaps we shouldn’t belittle the possible importance of today’s NFP report. We still doubt the FOMC will raise the key policy rate on 28 th October and keep December as the most probable month for action. But on balance the report should help support the short-end of the US yield curve and provide continued support for the dollar. Bullard and Fischer both speak today after the jobs report and hence there comments may prove important.

CIBC: CIBC forecasts September payrolls at 206k and unemployment rate unchanged at 5.1%.

SocGen: It doesn’t seem likely that Friday’s US employment data will change the debate about Fed policy much, unless the numbers are surprisingly weak. We expect a 225K gain and a drop to 5% in the unemployment rate.

Commerzbank: US employment rose at a below-average pace in August, as expected. In past years too, preliminary publication of the August figures was well below the average for the other months and the data were then usually gradually revised upwards. In September of previous years, this effect usually disappears and we consequently expect a rise in employment again in line with the medium-term trend (Chart 5). We therefore expect job growth of 210k (consensus: +200k). The unemployment rate, which had fallen quite substantially in August (from 5.26% to 5.11%) should be unchanged at 5.1% (consensus: 5.1%), putting it only just above the updated FOMC estimates of the “natural” rate of 4.8%.

Citi: Much less anticipation but all eyes on non-farm payrolls where consensus looks for 201k from 173k last month. We think a weak number is more USD-negative than a strong number is positive. If a weaker number (as our economists expect – 180k) USD likely to underperform majors and outperform higher beta currencies.

Danske: Our models suggest a slowdown in job growth in September to 180,000 and even though this is slower than the recent trend, it is still enough, if sustained, to put additional downward pressure on the unemployment rate. In our view, job growth will need to drop below the 160,000 mark before the Fed will see it as an obstacle to starting the tightening cycle later this year. In terms of the unemployment rate, we expect the rate to stay unchanged at 5.1% in September but to head below 5% by year-end.

'This content has been provided under specific arrangement with eFXnews.'