A little more context for the imminent jobs report, via Citi:With the FOMC, the ECB and the BoE out of the picture market focus is shifting towards the final big event of this week – the October NFP. Ahead of the release later today, the Bloomberg median forecast is a positive gain of 60K. The median was around +40k a week ago before the ADP payroll number and the ISM employment components were released. Citi’s economists penned a forecast of +50k last Friday and have not revised upwards, although they have noted that the surprise risk to their forecast is likely to be above +50k. The Bloomberg median for private-sector payrolls is +80K.
For the past couple of months leading in to payrolls, the market has been ‘rooting’ for a payrolls number that would not indicate a renewed recession, but that would not be positive enough to scare the FOMC out of QE2. We would have put the ‘sweet spot’ for the September payrolls number released in October at a range of -50k to +50k. With the FOMC now having already embarked on QE2, we think the sweet spot has shifted. Now the market wants to see positive growth and so long as payrolls aren’t averaging more than +125k per month for several months, the FOMC is unlikely to scale down QE2. So the new sweet spot is probably something like +25k to +125k.