From Bloomberg's Richard Breslow
For today’s non-farm payrolls number, analysts have apparently taken the advice that, “When in doubt, punt. But don’t be a punter.” After two big misses in a row left everyone wondering just how scientific forecasting this number can be, there’s a remarkable clustering of estimates around the “consensus.” Safety in numbers. Even so, the whisper number is for a beat.
There’s a general acceptance that with December a long way off, this number may just not be all that important. Experience has shown that the time horizon for accurately predicting the economy, let alone financial conditions, is a lot shorter than anyone thought in their worst imaginations.
And if it influences “Fedspeak,” well, not everyone’s opinion was created equal. Janet Yellen, rather smartly, isn’t talking until the end of the month.
Even with futures pricing only a 37% probability of a raise by the last meeting of the year, if you asked most traders they’d tell you that, yeah, the Fed will probably slip one hike in come year-end. Why? Because they’d like to. That’s known as low conviction and hard to position for.
When the BOE ramped its liquidity provisions yesterday, bonds the world over leapt. The MSCI emerging markets index is loving it. Showing once again, as if we need to be reminded, that the notion of decoupling is fantasy.
The world is easing. On a strong number, is Fed hawkishness to be believed? Is the Fed planning on filling in Carney’s bids? And on a weak number, hibernation stasis.
For this number to be impactful, it will have to be one in a long string of releases painting the same picture.
With payroll change estimated at 180k, its reasonable to say a 20k miss in either direction is statistically of no significance. Of the 88 forecasts in the Bloomberg survey, 76 are within that range. I’m told it has something to do with better weather not clouding the models’ vision.