US Non-Farm Payrolls May Disappoint, But Don’t Expect That To Change The Rate Path
The biggest US data point of the month, Non-Farm Payrolls, comes in at Friday 8.30am EST. This month’s data will be hurricane effected, so consensus is for a low headline number. Considering how strong the PMI’s were this week, a poor NFP can be shrugged off as transitory and the Fed can stick with the current rate path.
The Fed has a record of passing off poor data (i.e. data that doesn’t support their cause) as transitory. At the last Fed hike Yellen said those words about inflation, and that their rate projections were still on track. The effect of the hurricane’s on US jobs is well know, so I don’t expect that the Fed is going to change their beliefs about the US economy based on tomorrows number. In many ways it’s almost inconsequential, unless it’s a huge number which stuns the market.
Here’s what the banks have to say:
- Hurricane Harvey may have led to a decline in nonfarm payrolls in September, which would mark the first negative reading in seven years.
- Quantifying the hurricane’s impact on job growth is fraught with uncertainty, but we suspect that Harvey’s impact was similar to the drag on payrolls seen in the wake of Hurricane Katrina in 2005.
- +75k headline forecast
- Private payrolls +70k
- Average hourly earnings +0.3% m/m & 2.6% y/y
- Average weekly hours remain unchanged at 34.4
- Unchanged unemployment rate at 4.4%.
- Informing our view are initial and continuing jobless claims, which have risen following the landfall of Hurricanes Harvey and Irma. Offsetting this to some degree are other factors like part-time employment for economic reasons and the employment diffusion index, which have shown improvement in recent months.
- +50k headline
- +50k private
- Unemployment rate steady at 4.4%
- In fact, the “weather workers” series within the Household survey should provide a reasonable sense of the magnitude of the hurricane related disruptions to the payroll data
- Unemployment rate steady at 4.4%.
- Expect average hourly earnings +0.3% m/m and 2.6% y/y
- The likely effects of Hurricanes Harvey and Irma on the national labour market data are difficult to predict.
- In 2005, hundreds of thousands of people were displaced by Hurricane Katrina. Massive job losses in the region were readily apparent in the September and October 2005 employment reports.
- In contrast, the Bureau of Labor Statistics assessed in 2012 that Hurricane Sandy did not have a substantive impact on its estimates for national employment.
- Figures on weekly initial claims suggest that over 100,000 people have filed for unemployment insurance in Texas and Florida as a consequence of the recent disasters. However, the impact of the hurricanes on the September payroll data could end up being smaller, depending in part on how many of the affected persons worked or received pay for some portion of the relevant time period.