NFP gives cover to Yellen to continue to raise rates

AFTER THE RELEASE:

"Last week ended with positive US employment data. Notably, average wages rose by 2.9%; significantly above the Federal Reserve’s 2% inflation target. If disposable incomes are rising, then it opens the door for higher interest rates and that will strengthen the USD.", by David Johnson

"On Friday we called for a Neutral bias as is our custom for Jobs Friday. As it turned out it seems that the US economy lost about 33,000 jobs as a direct result of Hurricanes Harvey in Texas and Irma in Florida. I do not recall such a thing happening even after Superstorm Sandy in 2012. Now some may be wondering how could that happen? In the states where Hurricane Harvey and Irma landed, those states have very lax employment laws and are free to hire and fire at will whereas the states where Sandy hit (NJ, NY) those states have far stronger employment laws and regulations. The true telltale sign will be next months' Non Farm Payroll report.", by Nick Mastrandrea

"... the other issue is whether Friday’s non-farms data is going to put a lid on the dollar’s rally – most think it unlikely, with the Fed likely to look beyond the poor number to an economy that seems to be powering ahead in the three key areas of employment, inflation and wages. ", by Chris Beauchamp

"The Labour Department showed that the US job market faced unexpected decrease in jobs, as the economy lost 33K positions in September, reflecting the impact of Hurricanes Harvey and Irma. However, the unemployment rate declined to a new low of 4.2% in the same period. Following the report, market expectations for the Federal Reserve to raise rates in December were still high.", by Dukascopy Bank Team

"Nonfarm payroll employment decreased 33,000 in September, the first contraction in seven years. Data showed sharp employment decline in food & beverages services and below-trend growth in some other industries.  This reflected the impact of Hurricanes Irma and Harvey. Such outcome showed weak NFP don’t reflect the economic fundamentals and Fed has no reason to set policy outlook based on the payroll numbers this month.
The unemployment rate in September declined to 4.2%, lowest level since 2001. It is worth taking a look. With the unemployment rate heading towards 4% and probably falling below, Fed must respond to “very tight” US labour market by gradually raising interest rates or risk halting the economic recovery. ", by Wayne Ko Heng Whye

"By history of this news indicator, we can see, that negative NFP market have once per 7-8 year cycle and after we started to have negative NFP, this crysis period is going over 12-18 month, where last of them was on 2001 and 2008 years. But sometimes its happens when NFP became negative, but if after this one we will have more again - this signal will became very dangerous. But before this apocalyptic scenario we do not have any other economic signals for such possible situation, so looks that negative NFP we had just because US economy is already fully loaded by working places, because unemployment is felt from 4.4% to 4.2%, that is very good sign." by Anton Kolhanov

"How did the BLS show an increase in the Avg. Hourly Earnings, when the 2 components of the data showed a decline? This is a question that only the BLS can answer... Hello? BLS? Is anyone there? They've all left the building? Figures! Oh well, I turn to the boys at zerohedge.com, for an explanation... they can show you the math... And even using the kind of math they teach these days, it still doesn't add up!
Goods-Producing Weekly Earnings declined -0.8% from $1,118.68 to $1,109.92
Private Service-Providing Weekly Earnings declined -0.1% from $868.80 to $868.18
And yet, Total Private Hourly Earnings rose 0.2% from $907.82 to $909.19
What the above shows is, in a word, impossible: one can not have the two subcomponents of a sum-total decline, while the total increases. The math does not work.", by Chuck Butler

"…the only part of the report that was bullish (or concerning - depends on how you look at it)  was the rise in avg hourly earnings…this data point rose more than expected +0.5% vs. the exp of +0.3%.   – and this gives cover to Janet Yellen and her band of merry men to continue to raise rates….. because nascent signs of wage growth will cause the FED to jump in front of this train  - before is it too late... 
Signs of accelerating  wage growth suggest that employers are having to increase wages in order to keep workers and this suggests an ‘overheating’ economy that could see inflation increase rapidly….…it is called ‘Wage Push Inflation’  ", by Kenny Polcari

"We fully accept that the September employment data was distorted by the storms.  There is no reason to doubt that the underlying strength and improvement of the labor markets has ended. Nor do we think it has accelerated. While the headline was distorted to the downside by the most amount of people unable to go to work due to the weather in 20 years, the hourly earnings were flattered.
Workers in food and drinking establishments, mostly lower pay, were particularly hard hit by the storm.  At the same time, there appears to have been an increased demand for some higher-paid professionals.  However, we can be confident that the upward revision to the August hourly earnings to 2.7% from 2.5%, was not skewed.  This is the strongest pace since 2009.", by Marc Chandler

"What's more interesting is wage growth, which is needed if the Fed is ever to get the 2% inflation target. Wage growth is rising but still under 3% and a far cry from the 4% that prevailed pre-crisis." by Barbara Rockefeller

 

BEFORE THE RELEASE:

 

"It's not clear that the payrolls report will get a pass because of the hurricanes. A bad number is still likely to cause a spike down in the dollar, whereas a better-than-expected number may not provide a boost." by Barbara Rockefeller

"If tomorrows Non farm payrolls figure and unemployment rate hit the market above expectations the chances of a rate hike will probably rise to over 90 percent and that should see the gold price tumble again. On the other hand, if the figures disappoint investors, gold is likely to benefit as the chances of a rate rise fall." by Andrew Masters

"The ISM Services report surged in September - climbing to 59 from the expected 55.5 and 4 pts higher than the 55 reported in August.....and this makes sense - as it mirrors the ISM Manufacturing report that showed a surge earlier in the week.  Both of these indices are now well above the '50 yard line' and as such suggest strong expansion in both the manufacturing and services sectors of the economy. Now you can argue that we have seen a jump in both of these surveys because of Harvey and Irma - but no matter - the surveys are what the surveys are.....and readings well above 50 are BULLISH." by Kenni Polcari

"Next up - we heard from ADP yesterday as well about the state of job growth....here is where some are saying it was disappointing.......but look - we were only expecting 135k new jobs and that is what we got...YES it was down from last month's 228k jobs - but that doesn't matter.....the estimate was for +135k, the mkt expected +135k and that is what we got.....so NO - it was not a disappointment at all.....it was just as EXPECTED so no drama please. Look - Friday's NFP report  (Non Farm Payroll) is only estimated to show an increase of 80k jobs so as long as we meet the estimate the mkt should not react.....Now if the report shows a zero increase or worse yet a decrease in job creation then THAT would be a surprise and the mkt would react.....and if the report shows much stronger growth - then that would also be a surprise...but if we get 80k jobs then it's a wash and while it may be lower than last month - the analysts have prepped us for +80k....Period the end......You can say all you want that the estimate is 50% of last month's report - but it is what it is......investors and the mkts are prepared for 80K.  Capisce? " by Kenni Polcari

"Forecast for NFP for only 90K new jobs created in September is seen affected by hurricanes that hit US states on the south, but wages are expected to rise, according to the forecast for September at 0.3% vs 0.1% in August.", by Slobodan Drvenica

"According to the estimates, the U.S. economy is expected to add 82k jobs for the month of September which is below the average trend. On the upside, wages are expected to grow 0.3% on the month while the unemployment rate is expected to remain steady at 4.4%. Canada will also be releasing its jobs report today and the Canadian unemployment rate is expected to tick higher to 6.3% from 6.2% in the previous month.", by John Benjamin

"the US Department of Labor will release NFP for September, per market consensus, it is expected to come in at a meagre 88,000 due to the impact of the recent Hurricanes. However, with the knowledge that NFP has been negatively impacted by Harvey and Irma, the markets will have “priced-in” a potentially poor data release. The markets will be also closely watching the Average Hourly Earnings release at the same time. The markets are hoping to see an improvement on the previous readings. The previous release of 0.1% was the lowest increase since March. The consensus is calling for a robust increase in September’s release to 0.3%. With higher average earnings, consumer spending should increase, which will then help create inflationary pressure – helping underscore the Federal Reserve’s plans to hike rates before the end of the year. Closing out the slew of Department of Labour data releases will be US Unemployment. Consensus calls for an unchanged rate of 4.4%." by Team FxPro

"We see an asymmetrical risk. If payrolls are indeed weak, markets may discard them as unreliable. Better than expected job growth and, maybe even more important, a positive surprise in wage growth will be seen as confirming recent strong US data. It might reinforce the reflation trade, including the rise of the dollar. A weak figure might have only a modest negative impact on the dollar.", by KBC Market Research Desk

"Consensus expectations are that the US created 90k jobs in September, down from 156k in August. It would probably need a contraction in the US workforce in September to put off a Fed seemingly intent on its third rate hike this year.", by Jasper Lawler,CMT

"We estimate jobs growth slowed to 90,000 in September due to hurricanes, so it does not change our view that the underlying st rength of the labour market is strong. We expect markets to look mainly at average hourly earnings and not so much non-farm payrolls. This is also what the Fed signalled at the latest meet ing, as the statement explicit ly said that the Fed will look through short -term weakness due to hurricanes.", by Arne Lohmann Rasmussen

"The short term momentum indicators also look heavy and I will be short heading into the US data and looking to sell into any short term rally, with a SL placed above 1.1800. Sell EurUsd @ 1.1730. SL @ 1.1785, TP @ 1.1650.", by Jim Langlands

"The job market is expected to have been adversely effected by the recent Hurricanes - Harvey and Irma, with consensus estimates pointing to addition of 90K new jobs as compared to 156K in August. Hence, any positive surprise would be enough to support the already strong bullish sentiment surrounding the buck.", by Haresh Menghani

"Heading into NFP, market forecasts are stunted given the likelihood of the hurricanes distorting the data. None the less, it has been difficult to overlook this week’s stellar US economic data as both ADP data, and weekly initial jobless claims have been surprisingly buoyant. But perhaps the most astounding signals are generating from this week’s ISM PMI’s that clocked in at 12-year highs. One can only assume that more positive economic data surprises are just around the corner.[...] Make no mistake AHE tends to give FX traders the clearest signal on NFP and this pattern should hold true even more so today. Since the wages reading has been exceptionally soft, any upside surprise will likely generate an outsized move on the USD.", by Stephen Innes

"The low expectations for the NFP headline data may well have overestimated the impact of the recent storms. If this is indeed the case, then a better-than-expected showing on Friday could be in store for the markets, which may sustain the US dollar’s recent recovery. Any such jobs beat would help support the Federal Reserve’s current policy trajectory towards higher interest rates, and possibly increase the already-high market expectations for a December rate hike by the Fed. Supporting a better-than-expected showing for the non-farm payrolls report on Friday have been key employment-related data releases this week, including the ADP private employment report as well as the ISM manufacturing and non-manufacturing PMI employment components.
[...]
it is likely that the economic damage may have been overestimated with respect to Friday’s jobs data. This should especially be the case since other key employment-related data suggest that September job growth may have been more resilient than expected. With consensus expectations ranging primarily between 80,000-90,000 jobs added in September, our target range is 120,000-140,000. Any result falling within this range or higher is likely to further boost a US dollar that has already been in recovery mode for the past four weeks. An outcome below 80,000 is improbable, so if that does occur, the dollar could be dragged down sharply. Between 80,000-120,000, the market reaction becomes less clear. If that is indeed the case, any strongly-defined market move would be unlikely, as the added uncertainty of forecasting the weather-related impact may peg September as an anomaly with little value in providing any guidance for the dollar.", by James Chen

"Therefore the initial decline on a soft report should be short lived but if job growth beats expectations and rises by 80K or more, the dollar will rise quickly and aggressively as the data shows only limited setback from the hurricanes. Based on the following leading indicators for NFPs, there's certainly reason to believe that payrolls will surprise to the upside and if that's the case it would reinforce the Fed's hawkishness. Aside from watching the level of job growth, investors also need to pay attention to wage growth and the unemployment rate. If wage growth, which has been subdued for the past 3 month bounces by 0.3% as anticipated, it could offset a soft headline number or exacerbate a positive report.  Investors will be more surprised by strength than weakness and for this reason we believe the dollar will have a greater reaction to strong versus weak payrolls." by Kathy Lien

"The market is looking for an extremely weak 80k, which factors in the effect of the hurricanes. We believe that consensus is too pessimistic, and our model is looking for a healthier reading of 171k. [...] e are comfortable with our above-consensus reading due to two factors. Firstly, September’s ISM reports seemed unaffected by Harvey and Irma, with the manufacturing reading rising to its highest level since 2004. Secondly, initial jobless claims have been similarly unaffected, which makes us query why economists surveyed by Bloomberg are expecting the NFP data to be affected so sharply. [...] however, the City Index model tends to predict smoother numbers, whereas the actual NFP reading can be volatile. While we expect a better than expected number, we cannot rule out the prospect of an outlier as the NFP report has a history of volatility. Thus, be ready for the unexpected." by Kathleen Brooks

"If the numbers are a big disappointment, and particularly with wages down, the greenback could edge lower against the EUR, the JPY and the AUD, the most affected from rising hopes of a rate hike in the US. A strong jobs report, with wages' growth included, on the other hand, should favor the greenback against all of its major rivals, but with the rally being probably less interesting in terms of pips' moves.", by Valeria Bednarik

"In US, the market is looking for a sharp drop off in job due to severe hurricane activity last month, but the true focus will be on average hourly earnings which are forecast to rise 0.3%. If the number meets expectations then the dollar is likely to rally irrespective of the payroll results as markets will be heartened to see that wage growth is finally taking hold. Deflation has been the one and only concern of the Fed and broader economic growth is finally translating to wage gains the US central is almost certain to hike rates in December." by Boris Schlossberg