US Nonfarm Payrolls Prep

On Friday the 2nd of October at 08:30 ET, the BLS is releasing the September Employment Situation report, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings.
Here are some views on what to expect.

General Expectations
Nonfarm Payrolls – Forecast: 88k | Prior: 162k | Range: 180k / 35k
Unemployment Rate – Forecast: 4.1% | Prior: 4.1% | Range: 4.2% / 4%
Average Earnings YoY – Forecast: 3.1% | Prior: 3.1% | Range: 3.2% / 3%

What to Expect
US Stocks
A moderate payroll increase alongside a stable unemployment rate and contained wage growth would likely be the most supportive combination for equities, suggesting the labour market remains resilient without generating significant additional inflation pressure. A very strong payroll and earnings report could weigh on rate-sensitive stocks by strengthening expectations for restrictive Fed policy, while a sharp employment miss or rise in unemployment could raise concerns about economic growth.
US Dollar
Stronger-than-expected payroll growth, lower unemployment or hotter Average Hourly Earnings would likely support the dollar by reinforcing expectations for tighter monetary policy. A weak payroll figure accompanied by rising unemployment and softer wages would likely pressure the dollar as markets price a more accommodative Fed outlook.
US Government Bond Yields
Treasury yields would likely rise on a strong employment report, particularly if Average Hourly Earnings exceed expectations. Conversely, weak payroll growth, a higher unemployment rate and softer wage inflation would likely pull yields lower. Revisions will also be important given the substantial changes to June and July payrolls in the previous report.
Federal Reserve Policy
The September report will help determine whether August’s 162k payroll rebound represented a genuine improvement in labour demand or a temporary interruption to the broader hiring slowdown. Despite the strong headline August figure, payroll growth averaged just 31k per month over the preceding year, while annual earnings growth slowed to 3.1%.
Another solid payroll gain accompanied by stable unemployment and firm wage growth would provide evidence that labour-market conditions remain resilient and support keeping policy restrictive. A return to weak hiring, particularly if accompanied by rising unemployment and softer earnings growth, would strengthen evidence that labour demand is deteriorating and increase the case for a more accommodative policy path.

Commentary
Wells Fargo
Nonfarm payrolls are expected to rise by 90K in September after August’s stronger gain. Broader labour-market indicators remain relatively firm, with hiring measures from regional Fed and small-business surveys above year-ago levels, initial jobless claims near multi-decade lows and job postings showing a modest improvement. Local government education payrolls remain a potential source of volatility after a sharp July decline and partial August rebound.

The unemployment rate is expected to hold at 4.1%, with labour-force participation showing tentative signs of stabilisation. Average hourly earnings are forecast to rise 0.3% month-on-month, lifting annual wage growth to 3.2%. Overall, the labour market still appears broadly balanced, with enough demand to support continued job growth but little evidence that wages are creating significant additional inflation pressure.

Bank of America
Payrolls are expected to rise by a below-consensus 60K in September, including 50K in the private sector, down sharply from August’s 162K gain. Much of the slowdown is expected to reflect payback from unusually favourable August seasonal factors rather than a meaningful deterioration in hiring. Initial and continuing claims remain near historic lows, ADP readings have improved, and broader indicators still point to underlying job growth of around 100K or more.

The unemployment rate is expected to remain at 4.1% with participation broadly steady, although some reversal of August’s jump in household employment could push it to 4.2%. TPS visa revocations may also weigh on payrolls and labour-force participation. Given Warsh’s recent emphasis on labour-market resilience, even a softer headline print is not expected to materially change October Fed hike pricing.

Credit Agricole
Nonfarm payrolls are tentatively expected to rise by 90K in September, slowing from 162K in August but remaining well above July’s 21K increase. The report could be unusually volatile because government education employment typically has a large seasonal impact in September and has already swung sharply over the past couple of months.
The unemployment rate is expected to edge up to 4.2% from 4.1%, although that would still be low historically and consistent with a labour market close to balance. Average hourly earnings are seen rising 0.2% month-on-month, leaving annual wage growth unchanged at 3.1%.

Previous Release
Nonfarm payrolls rose by 162K in August, rebounding strongly from July’s revised 21K increase. The unemployment rate held at 4.1%, while average hourly earnings rose 0.3% month-on-month and 3.1% year-on-year. Labour-force participation increased to 61.6% and the employment-population ratio rose to 59.1%, with the household survey showing employment up 569K and the labour force expanding by 683K.

Job gains were led by food services and drinking places, local government education and manufacturing, while information employment declined. The average workweek edged up to 34.4 hours, and revisions added a combined 55K jobs to June and July. Despite the stronger August report, the broader employment trend remained subdued, with payroll growth averaging only 31K per month over the previous 12 months and annual wage growth moderating to 3.1%.

This was read as a hawkish print, and it caused strength in the dollar and weakness in the index market and gold prices.