• Markets feeling just like they usually do pre-nonfarm
  • Nonfarm payrolls are widely expected to decelerate
  • US COVID-19 cases, hospitalizations and deaths continue to soar
  • US trade deficit expected to narrow
  • Canada’s trade surplus faces downside risk
  • US jobless claims land outside of nonfarm reference period
  • US factory orders will need a boost from nondurables
  • Watch Quebec polling following tonight’s first leaders debate

It’s feeling like a typical pre-nonfarm market session as everyone else stays out of the way of any potential wrecking ball effects. Sovereign curves have a mild flattening bias. The USD has a slightly softer bias. Equities are little changed with slight gains in N.A. futures and flatness across most European exchanges. Who wants to stick their neck out on positioning into a volatile payrolls estimate?

There was nothing material out overnight that was either calendar-based or off calendar, just more speculation toward next week’s ECB and RBA meetings and trying to outguess Chinese policy timing. There will be very little out in today’s N.A. session unless trade updates do it for you.


Canada updates trade figures for July this morning (8:30amET). The massive gain in exports the prior month and the dip in imports should mean revert and drive either a lower trade surplus or a return to deficit. Still, trade figures rarely have much influence on market sentiment even without nonfarm lurking ahead.

For Canadian election watchers, performances in tonight’s first French language leaders debate on a regional Quebec tv network may influence polling into tomorrow and the long weekend in the key province that often determines election outcomes. The separatist and social democratic BQ party has been stumbling in the polls. Poll composites put the Libs at 33% support in Quebec followed by the BQ at 27% and then the Conservatives at 20% while the NDP is at 13%. Elections are usually mostly decided by outcomes in Quebec, typically liberal Toronto and the relatively more conservative 905 belt.


The US will only update monthly trade figures for July (8:30amET) and factory orders (10amET) for the same month. Given we already know the advance merchandise trade deficit narrowed somewhat, the total deficit including the services surplus is also expected to narrow. In order for factory orders to stay in the black they would need a gain in nondurables to offset what we already know about total durable goods orders that slipped -0.1%.

The focus is nevertheless obviously upon tomorrow’s nonfarm payrolls estimate. The whisper number (a mish mash of guesstimates contributed by anyone who wishes to do so on Bloomberg) sits at 715k and it has been on a declining trend over the course of the past month as more estimates have been submitted (chart 1). To the extent to which this reflects market expectations it indicates that most are expecting somewhat of a deceleration in the pace of job growth.

That lines up with the expectations of most economists in the consensus surveys. The sample mean is 707k with a standard deviation of 137k and the 90% confidence interval for nonfarm payrolls is +/- 110k. Ergo, most estimates within consensus lie within the statistical noise bands.

What’s driving expectations for slower—but hardly slow—job growth? A few things as follows:

  • intuitively it may be natural to expect cooling job growth after an initial spurt of activity following the reopening of the services sector;
  • that effect upon services is vulnerable in the face of rising COVID-19 cases that could dampen hiring intentions and job acceptance in sectors like leisure and hospitality. Cases began soaring between reference periods for nonfarm payrolls and both hospitalizations and deaths continue to rise (charts 2–4);

  • it may be that many of the lower wage workers that are particularly concentrated in high contact service sectors have already returned to work (chart 5) which could mean that the low hanging fruit of the job recovery has been picked;

  • it may also be that many parents have already returned to work before the kids return to school. Chart 6 shows that the number of parents who say they can’t work because they are caring for their children fell to a pandemic-era low and plunged over the summer. That could still contribute to August payrolls since much of the decline in this survey-based measure occurred in August, but it may dampen expectations for September payrolls.

  • Otherwise we’re left with often unreliable and noisy advance indicators, like the deceleration in ADP payrolls, the modest decline in initial jobless claims between nonfarm reference periods, the deceleration in ISM-manufacturing-employment and the slightly cooler reading on jobs plentiful sentiment within the Conference Board’s consumer confidence measure.

So bring on nonfarm and the best of luck to market participants.  


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