*skip to bottom for estimate.
Consensus seems to point to weaker job growth to come, although due to the ADP report, many forecasters who expected low NFP numbers now have revised their numbers up higher. Currently non-farm payroll is only at 80k which means it will not take much to surprise on the upside. Of 81 economists surveyed by Bloomberg, the most optimistic forecast came from Janney Montgomery Scott LLC, whose estimate was right on for the previous month, with a very optimistic forecast which was closest to the real NFP number. The forecast of Janney Montgomery is currently an addition of 195k jobs added for November, while the average forecast of many banks and various forecasters in headlines are around 100-125k. Looking to a chart of monthly releases of ADP with private sector payrolls and total non-farm payrolls there is a general correlation. Although, ADP tends to be an overly bullish indicator as NFP private sector tends to lag the ADP for the majority the chart from 2002 - 2007. Janney Montgomery's 195k and ADP's 189k additions are not wholly accurate but certainly point to a more bullish NFP report. Adding to increase of jobs can be found from the Christmas hiring season. I can agree with that argument since November would be an appropriate time to get temporary employees for the upcoming Christmas break. It is also possible that the thanksgiving break will add to increase of jobs since many people took a few days off. This possibly created demand for the retail side, demand in regards to preparing for the December holidays (soft, hard, big box, restaurants would all benefit). Though, I would exclude any benefits for jobs from travel considering a weak dollar, and one can confirm this with the performance on airline equities of the past month. Also, NFP report is a lagging indicator of GDP, and for the two quarters showed strong GDP growth. Overall I am more bullish on the expected report.
I expected any negative affects for the job market coming from housing, mortagage markets, or the financial sector to reflect in later reports after the holidays (as the holidays will skew numbers to the upside).
If NFP are reported above 125k there will be a possible significant rally with the dollar. If NFP rolls come out around 110k, there will only be a slight rally in the dollar. In regards to the EUR/USD I feel that the NFD would have to beat the ADP report of 189k in order for the pair to make new highs.
*potential risk can come from revisions in the October number since it can affect this months number.
In terms of Fed's decision. It was never in my opinion that the Feds were going to cut 50 basis points. Firstly, another 50 basis cut would not happen since we are in a more inflationary environment as the dollar has still not fully recovered. Such a large cut would only bring about more inflationary pressures. Adding to inflationary pressures, oil is back up trading in the 90's. In times of crisis such as "sub-prime" and the "credit crisis" the best measure is a series of small cuts, as done in the past with other crisis's. As it is necessary to do small cuts to provide much needed liquidity, as opposed to doing large cuts to try and solve the problem all at once inefficiently (as the previous 50 basis point cut by the feds hasn't changed the economy much).
Considering that i feel ADP has over stated reports, NFD would have to be reported below 189k.
Considering that I am bullish, and that I expect a surprise, I believe the report would have to be above the average consensus of 125k.
I think the NFP report will be more towards the higher end considering Janney Montgomery's performance, stronger holiday hiring, and thanksgiving break.
I expect an addition of 175,000 jobs.
-Alexander Lê
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