3 reasons the US jobs report could be a beat

It’s Jobs Day in America!

On Friday, economists expect the economy added 185,000 jobs in October while the unemployment rate is expected to fall to 5%.

In a note ahead of the report, Brean Capital’s Peter Tchir said that ultimately, the jobs report is such a crapshoot nothing between 100,000 and 250,000 would surprise him.

But Tchir pointed to three things that indicate the report could come in better-than-expected:

  1. Last month every economist was predicting positive revisions and we got negative — they aren’t usually universally wrong so maybe we get some payback this month (I haven’t seen anyone dare to mention positive revisions).
  2. If NFP is a pseudo random number around an actual trend, then last month’s disastrous report may see a decent uptick (one undershorts, the other overshoots). If the jobs number was truly random, then this wouldn’t work — like betting red just because a roulette wheel was black 8 times in a row — but this isn’t purely random.
  3. Along the same lines, the extremely volatile household number, which was off the charts but last month has a tendency to average the establishment over time. Could lead to a 4.9% unemployment rate.

Tchir added that while it seems like markets are “hoping to be disappointed,” this week Fed officials have been clear in their message: a rate hike in December is a very real possibility.

If the number is better than expected, expect more of the same.

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