Tomorrow brings the most important economic data of the month – the Nonfarm Payrolls Report. Investors appear to be prepping for a negative report after jobless claims came in weaker than expected this morning and are forecasting very marginal improvements in month over month job gains. Last month’s data came in at -216K jobs and an unemployment rate of 9.7%. The consensus is currently forecasting -170K and an unemployment rate of 9.8%. Let’s have a look around Wall Street at what analysts currently expect:
PNC is looking for -190K and an unemployment rate of 9.8%.
Wells Fargo says:
We expect nonfarm employment likely dropped by 205,000 jobs with the unemployment rate reaching 9.8 percent in August. Nonfarm employment will likely continue to decline into early 2010 and the unemployment rate will not likely top out until early to the middle of next year.
JP Morgan is the most optimistic of the bunch:
We forecast that the unemployment rate edged up to 9.8% in September from 9.7% (9.657%) in August. We ultimately expect the unemployment rate to peak at around 10.0% by the end of the year.
We expect that nonfarm payroll employment fell by 140,000 in September after falling by 216,000 in August and an average of 318,000 per month over the last three months. We also expect that the unemployment rate increased to 9.8% from 9.7%.
Zero Hedge has the report from Goldman Sachs:
Goldman’s NFP forecasts have an eerie ability to be +/- 3 people of the actual payroll number. Which is why those expecting an upside surprise to tomorrow’s payroll number may be unpleasantly surprised. Just released by Jan Hatzius of GS:
Downgrading Our Sept Payroll Forecast
BOTTOM LINE: We are changing our forecast for the September change in nonfarm payrolls to -250,000 from -200,000. We continue to think that the unemployment rate will be reported at 9.8%.
1. The latest data points on the US job market have been disappointing on balance, including the Monster index of on-line hiring, the ISM employment index, consumers’ assessments of job availability, and the total number of individuals receiving continuing claims for unemployment insurance, including those for extended benefits. Accordingly, we now expect nonfarm payrolls to be reported at -250,000 in tomorrow’s labor market report for September versus a previous forecast of – 200,000.
2. Although many of the same indicators would suggest a larger increase in the unemployment rate than the 0.1-point we have been expecting, the new information is not quite enough to warrant a change, especially since the 9.7% reported for August rounded up to that level. However, risks lie to the side of a higher figure.
Consensus is calling for marginal month over month improvement which doesn’t appear far off to us. Plus, the market is pricing in a fairly negative number. Nonetheless, ignore Goldman at your own peril. The risk aversion trade doesn’t change heading into tomorrow’s NFP data….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.