What Wall Street Expects From Today's Payrolls Number

Here is the bogey for today's NFP number, which consensus expects will print at +230K (on a +300K whisper number), leading to a 5.8% unemployment rate, as some 93+ million Americans - driven by millions of Millennials - continue to languish outside of the labor force.

  • JP Morgan 200K
  • Goldman Sachs 220K
  • Citigroup 225K
  • HSBC 230K
  • UBS 230K
  • Credit Suisse 235K
  • Morgan Stanley 235K
  • Deutsche Bank 250K

The full preview of today's NFP report courtesy of RanSquawk:

  • US Change in Nonfarm Payrolls (Nov) M/M Exp. 230K (Low 140K, High 306K), Prev. 214K, Sep 256K
  • US Unemployment Rate (Nov) M/M Exp. 5.8% (Low 5.6%, High 5.9%), Prev. 5.8%, Sep 5.9%
  • US Average Hourly Earnings (Nov) M/M Exp. 0.2% (Low 0.2%, High 0.4%), Prev. 0.1%, Sep 0.0%

Friday’s NFP report is again expected to show strong growth with most analysts expecting the US to have created over 200K jobs during November. Recent employment data has supported expectations of strong growth, although the weekly jobless data has showed some sign of cooling heading into the holiday period. Throughout November, more Americans had filed applications for unemployment benefits and Initial Jobless Claims crept back above 300K, however Thursday’s reading decreased below 300K again and the 4-week average remains near its lowest levels since 2000. This week’s ADP employment report came in marginally below expectations but the trend of strong employment gains continued with the number at 208K. Other employment indicators have been positive with the employment component in the ISM Manufacturing and Non-Manufacturing readings both firmly above the key 50 threshold, despite falling from the previous month.

As has been the case recently, focus could fall on the wage component of the report with the current labour market picture being one of strong payroll gains but slow wage growth. Some Fed officials have stated that they want to see a pick-up in wages before they hike rates but at their most recent meeting they said the underutilisation of labour resources was gradually diminishing. However, this reading is unlikely to have too much of an impact on Fed policy, particularly in the near term, with most Fed officials more concerned about inflation continuing to remain below target, rather than the labour market, which continues to improve.

Market Reaction

Due to the numerous data points contained within the report, the fast money moves often don’t hold but a headline reading above the median expectation of 230K will likely support equity markets and the USD, and weigh on Treasuries with the curve flattening in the immediate aftermath. However, the S&P 500 and DJIA still trade at or around record highs so scope for large upside could be limited. Despite the selling seen yesterday, the USD also trades near multi-year highs as the US economy has shown a more resolute recovery than other global economies with Europe and Japan both lagging. As mentioned, this report is not expected to have a major impact on when the Fed will hike rates with markets currently pricing in the first hike at the meeting in September 2015.