A hiccup in the report may trigger more questions about the US economy
- Preview of November US employment release
- ADP employment change comes at 67K versus 135K estimate
- US ISM manufacturing for November 48.1 versus 49.2 estimate
- US ISM nonmanufacturing index for November 53.9 versus 54.5 estimate
A couple of key headlines (⬆️) to wrap your head around as we count down towards the US jobs report release later today.
Expectation is for a +183k reading but that is largely predicated on the fact that we're supposed to be seeing a rebound in job figures after the GM strike. However, that didn't prove to be the case in the ADP employment release seen earlier in the week.
Meanwhile, ISM employment readings also show a bit more of a mixed picture with employment seen weaker in the manufacturing survey but improving in the services one.
On the balance of things, I reckon it's best to be wary of a downside surprise when it comes to the headline non-farm payrolls reading later today.
All that said, weaker employment numbers isn't necessarily the deal breaker especially when the unemployment rate continues to sit under 4% as it is now.
As such, keep an eye on the unemployment rate itself as well as wages for a better overview on what the report later has to offer to markets.
If the headline figure is poor and it comes alongside a tick higher in the unemployment rate, expect that to send some jitters concerning the health of the US economy - despite the labour market being a bit of a lagging indicator.
At this stage, it's all about trying to avoid a hiccup like what we saw on Monday with the ISM manufacturing report miss. Given such expectations, the downside risks going into the report are materially higher than any upside surprises.
If we do see a more solid report later, it means little at the end of the day other than offering up some consolation to the dollar and maybe stocks.
For one, it is not going to shift Fed pricing in a significant manner (as compared to a miss, which could ignite talk of rate cuts again). And if the labour market is tracking along just nicely, that just leaves us with the status quo on dollar sentiment as well as the position Trump will take in trade talks.
So again, keep the focus on the downside risks as we look at the report later today. It could be the trigger to set off another wave of dollar selling and risk aversion to end the week.
