Société Générale economist Brian Jones predicts the U.S. economy added 240,000 nonfarm payrolls in September, making his forecast for tomorrow’s jobs report the most optimistic on Wall Street.
“We expect the Bureau of Labour Statistics’ long-awaited update on the employment situation in September to reveal the strongest payroll gain since February and the lowest joblessness since November 2008,” writes Jones in a note to clients. “The SG forecast is above consensus and a positive intraday impact for risky assets is expected if the SG forecast materialises. We expect [the S&P 500] to move up by 0.4% and the [10-year] USD swap rate to move up by 3 [basis points] in the first half hour after the release.”
Jones expands on his call in the note:
We expect the Bureau of Labour Statistics’ long-awaited update on the employment situation in September to reveal the strongest payroll gain since February and the lowest joblessness since November 2008. Nonfarm establishment probably added 240,000 net new workers last month, well above the 148,000 average posted over the June-August span. Several factors support our call for a marked pickup in hiring during the reference period (see table below left). Even after adjusting for the impact of data backlogs triggered by the introductions of new computer systems in California and Nevada, the average number of persons filing initial claims for jobless benefits fell by an estimated 12,000 to 322,000 over the four weeks heading into the September establishment period — the lowest level since October 2007. Meanwhile, the number of persons on regular state benefits rolls contracted by 173,000 between canvasses, while total benefit recipients under all programs contracted by 202,000. Weather conditions may also provide a lift to payroll additions in the upcoming report. The Atlantic hurricane season was the least active in 30 years with not a single tempest falling on US soil.
Given its potential impact on future monetary policy decisions, the civilian unemployment rate may prove to be as important as the nonfarm job count in Tuesday’s report. Reflecting the aforementioned reduction between household surveys in total persons receiving state and federal unemployment insurance benefits, our augmented insured unemployment measure dropped from 3.52% in August to 3.36% in September. A similar decline in the civilian jobless rate would place that key metric at 7.1% (7.112% unrounded) — the lowest reading since November 2008.
The report is released tomorrow at 8:30 AM ET. Click here for a complete preview »