Intraday Market Thoughts

What’s the NFP Minimum?

by Adam Button
Sep 1, 2016 23:23

Nonfarm payrolls is the marquee event on the calendar in the day ahead, we look at the key metrics and scenarios. The pound sterling was the top performer while the US dollar lagged. The Asia-Pacific week ends with Japanese August consumer confidence. Ashraf's 2nd Premium of the week has just been posted, focusing on the emerging links between high yield & indices and the preferred trades based on falling oil.

The Fed's Mester made an interesting comment about the jobs picture on Thursday, saying that the economy only needs 75K to 150K new jobs per month to keep unemployment steady.

That leaves for an interesting mismatch with the consensus estimate of 180K jobs on Friday. To be sure, the Fed has long warned that a decline in unemployment would lower jobs gains but it's unclear how the market would react.

By the same token, it's fair to ask how the Fed will react. For years, Fed speakers have highlighted that they smooth out economic data and don't focus on single numbers but when the May jobs report was dismal, the Fed scrambled to the sidelines.

So we're left with the question of what's needed to keep a realistic belief in a Fed hike on Sept 21. Despite what Mester said, it's probably at least 160K. Even then, virtually every other economic data point from now until Sept 21 would need to be strong.

In addition, revisions would need to be net positive with a favorable unemployment rate/participation rate and something that matches the +0.2% consensus on average hourly earnings.

If that's met, the dollar is likely to recuperate post-ISM losses but it may still leave dollar bulls uneasy about pushing further. However if the numbers are disappointing, the ISM jitteriness Thursday demonstrates that the crowded dollar long trade might get a more serious chill.

Before non-farm payrolls, at 0500 GMT, the August Japanese consumer confidence index is the lone notable economic release on the Asia-Pac calendar. The consensus estimate is 41.8 compared to 41.3 prior but it's not likely to be a yen mover.

Act Exp Prev GMT
Consumer Confidence
41.6 41.3 Sep 02 5:00

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