© Reuters
Investing.com – The August NFP U.S. jobs report to be released this Friday at 2:30 p.m. PST will arguably be the most important economic data of the week, potentially with a huge impact on earnings. markets.
Bad NFP Report Would Support Stocks
However, in order to properly address the market’s reaction to the figures that will be published today, it is essential to understand that in the current context, bad figures would have a bullish impact on the stock markets, while good figures could see the stock markets to move back.
In other words, in the case of the NFP report today, bad news would actually be positive. The reason is that poor US employment figures could prompt the Fed to slow its rate hike.
What does the consensus say for the NFP report?
To properly approach the publication, and assess the figures that will be published, it is first necessary to take stock of the consensus expectations and the figures of the previous month for all the components of the NFP report:
- Consensus estimate for: +300K
- July job creations: +528K
- Consensus estimate of: 3.5% vs. 3.5% previously.
- Previous participation rate: 62.1%
- y/y +5.3% expected vs +5.2% previously.
- m/m +0.4% expected vs. +0.5% previously.
- Average weekly hours 34.6 anticipated vs. 34.6 previously.
Update on other US employment data in August and seasonality
Another important element to take into account to best anticipate the NFP report concerns the other US employment statistics in August. In this regard, note that the published earlier this week calls for caution, it having reported only 132k job creation against 300k expected.
On the other hand, other employment data proved to be much more satisfactory, such as the ISM manufacturing employment sub-index which came out at 54.2 against 49.9 previously.
It should also be taken into account that there is a very strong seasonal tendency for the NFP non-farm payrolls figures for August to come out below the consensus. Last year, the number of non-farm payrolls was +235,000, against +750,000 expected.
In total, job creations in the NFP report have come out below the consensus over 17 of the past 21 years, with an average gap of 100,000 jobs over the months of August over the past 7 years.
The seasonality is therefore also leaning towards a bad NFP report, and therefore a rise in the stock markets, this Friday.
Goldman Sachs (NYSE:) predicts job creation above expectations
Finally, it should be noted that the famous investment bank Goldman Sachs announced yesterday to expect 350k job creation, ie 50,000 more than the consensus, which could on the contrary cause shares to plunge.
The bank also estimated that equities would react very positively to job creations of between 0 and 100,000, and a fortiori in the event of job destructions.