The US non-farm payrolls report for September will be released later today, and traders should get ready for some fireworks.
Not only is this report one of the most important data releases each and every month, providing an opportune time for investors to enter and exit trades, but mother nature looks set to wreak havoc on the figures.
The week the payrolls survey was conducted was just after Hurricane Harvey smashed into the Texas coastline and came just before the arrival of Hurricane Irma in Florida — two incredibly disruptive and destructive events that caused huge anomalies in other labour market data such as initial jobless claims.
Tom Porcelli, chief US economist at RBC Capital Markets, says that just like the claims data, those weather events will likely create some wild numbers in the September payrolls report.
The survey period for the September employment report — the week that includes the 12th of the month — began as Hurricane Irma was making landfall in Florida and as Texas was still reeling from the effects of Hurricane Harvey. Thus, we will be shocked if we don’t see a significant slowing in non-farm payroll growth on the month. Our best guess, given what Texas and Florida have added to payroll growth recently and trends in unemployment insurance claims in these states in the wake of the Hurricanes, is that headline and non-farm payroll growth will slow to around 50,000 on the month, against a 6-month trend of around 160,000. To be sure, there is incredible uncertainty in this forecast and this is also reflected in the range of Street estimates.
These two charts supplied by Porcelli show the impact Harvey and Irma had on initial jobless claims during the payrolls survey period.
The term “a dog’s breakfast” immediately comes to mind.
According to Porcelli, with the broader employment backdrop showing very little signs of stress, traders should be wary of positioning for potential weakness.
“Given the probability we get a very messy report is high, the market is likely to fade any weakness,” he says.
Markets expect payrolls to increase by 80,000, leaving the unemployment rate steady at 4.4%. Average hourly earnings are tipped to increase 0.3%, taking the year-on-year increase to 2.5%.
The report will be released at 11.30pm AEDT.