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NFP expectations: Has it ever been more important? - ING

FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, suggests that the recently Fed speakers had suggested that the September meeting was close call to 50:50 which raises the question – could a strong payrolls push this over the edge.

Key Quotes

“Since what has begun to be described by some analysts as a “bungled” September FOMC message, many FOMC members, though with the notable exception of Janet Yellen, have suggested that it would not take much to get them over the 50:50 threshold. Moreover, ignoring external developments, most data has subsequently been either satisfactory, or in some cases, increased still further.”

“Labour market data is, as ever, the most critical element of the Fed’s assessment of the economy, and despite the softish August payrolls headline, was bolstered by a substantial fall in the unemployment rate to 5.1%, which now sits comfortably in the Fed’s 5.1-5.2% NAIRU estimate.”

“Like the consensus, one of the key expectations is that the August figures are likely to see a strong revision upwards. Every August figure has been revised upwards since 1999, and by an average of about 39,000, which would take the recent release back above 200k from the initial release of 173k.”

“The September release is also subject to some softness in the initial release (eleven out of fifteen upwards revisions since 1999 at an average of about 20,000), which seasonal adjustment does not seem to fully smooth out. This is one reason not to get too carried away with our headline expectations.”

“That said, following this week’s ADP survey of 200k (from a revised 190k), we still think that something above 200k looks a good expectation, and one that the Fed should view as a satisfactory development from a rate setting perspective assuming the August figure is revised upwards as expected.”

“Given that we might get a somewhat mixed message from the payrolls and unemployment parts of this release, wages could provide the clincher for the Fed in its assessment of this data, and one that will strongly suggest that it should not hang about before moving rates higher. If the external environment does not change dramatically, this could be the one piece of data that suggests the Fed moving in October rather than waiting until December.”

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