ON DECK FOR FRIDAY, NOVEMBER 3
KEY POINTS:
- Markets await US, Canadian jobs reports
- Nonfarm payrolls preview
- Canadian jobs preview
- US ISM-services to follow jobs numbers
The week is ending with a nearly exclusive focus upon what may be revealed by job market updates out of the US and Canada this morning. On both counts, the long-established pattern is to expect the unexpected.
The US offers a rich array of job market indicators in advance of payrolls that—hubris within the forecasting community aside—don’t really help in forecasting payrolls. Perhaps Canada’s approach, which is to have little to nothing to offer as a guide to what to expect because of the paucity of other timely gauges, isn’t so much of a handicap after all. In both cases, the statistical noise factor points to ginormous confidence bands around the estimates which makes nailing the numbers largely futile.
This is more about the clean-up and assessing the consequences for the Fed, the BoC, and the broader macro context in the aftermath. In both cases, the numbers are one of two sets that will be available before the next FOMC meeting on December 13th and the next BoC decision on December 6th.
NONFARM PAYROLLS PREVIEW
Nonfarm payrolls, wages and the usual host of other monthly labour market readings arrive at 8:30amET. Here is a brief preview.
- Consensus m/m change median: +180k
- Consensus m/m change mean: 176.6k (so no skewness)
- Range: Most are within 125k to +235k
- Scotia: +200k
- Whisper number: +201k
- 90% confidence interval: +/- 130k. Most estimates fall within statistical noise.
- Std Dev: 31.7k
- Unemployment rate: 3.8% unchanged
- Wages: 0.3% m/m SA nonannualized
- Drivers:
- Most advance readings on the US labour market have performed well but nonfarm doesn’t necessarily follow them. They serve as a rough guide to broad labour market conditions.
- We’re coming off the strongest job gain since January with most assuming we’ll mean revert lower.
- Then again, nonfarm gains have exceeded consensus estimates eight times this year.
- The productivity surge did more of the heavy lifting this time in Q3 which might make for less urgency to continue hiring at a rapid clip.
- Consumer confidence ‘jobs plentiful’ ticked higher.
- Weekly jobless claims were slightly lower between the Sept and Oct nonfarm reference periods.
- Challenger jobs cuts inched a bit lower to 46k (chart 1).
- NFIB small business hiring plans inched up a tick. Jobs ‘hard to fill’ also moved up to a four month high.
- JOLTS job openings moved higher to 9.55 million in Sept from 9.5 (chart 2).
- ADP was softish at 113k, but also was the prior month (89k) when nonfarm ripped. Poor gauge.
- ISM-mfrg-employment fell by about 4 ½ points into contraction. Small share of total employment.
- ISM-services-employment won’t arrive until after nonfarm today (10amET).
CANADIAN JOBS PREVIEW
Canadian jobs, wages and the usual host of other monthly labour market readings arrive at 8:30amET. Here is a brief preview.
- Consensus m/m change median: 25k
- Consensus m/m change mean: 26.6k (no skewness)
- Range: +10k to +35k
- Scotia: +15k
- Whisper number: n/a
- 95% confidence interval: +/-57k
- Std Dev: 16.2k
- Wages: 5.2% y/y thin consensus
- Drivers: The prior month’s 64k gain was mostly driven by the education sector, self employed and part-time jobs. Both of those sector contributors were wonky. The education sector is having seasonal adjustment issues are the varying timing of teacher contracts now versus the past and so the drop in August righted itself in September. Self-employed can be valued jobs, but it’s the softest of the soft data.
- Unless other categories shake off their dull performance and rebound, then there is downside risk today as these two sectors will probably mean revert.
- Job vacancies are still somewhat above pre-pandemic levels and skewed to sectors like accommodation and food services. They might benefit as the holiday season approaches but probably not yet.
- What could matter more is wage growth. We’ve been seeing three consecutive months of wage gains for permanent employees on the order of about 10% m/m SAAR each time (chart 3). This is backed up by the lagging wage settlements figures that are explosive.
- Soaring wages are happening while productivity tumbles. Unlike the US where recent increases in employment costs have been paid for by productivity, that’s not true in Canada at all. Hence one of the BoC’s concerns in marked different to the Fed.
- Whatever happens to wages, it’s the trend that matters.
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