Enis’s Macro Wrap – Payrolls Friday

by Enis October 5, 2012 7:45 am • Commentary

Today’s jobs report holds less meaning than previous reports this year.  The Fed has already instituted the long-rumored QE3.  One monthly data point also does not have much meaning for the broader economy.  But traders will be itching to trade the data release regardless.

A few things to watch in the release:

  • Last year’s September release beat expectations by more than 100k jobs, so there might be a seasonal effect (left over from 2008) that could lead to a release much higher than expectations
  • The expected unemployment rate is 8.2%.  The 8% level is clearly important psychologically because once we get below that level, gradual calls for a pullback in Fed accommodation could start to gain steam
  • Manufacturing payrolls are expected to be unchanged.  Last month was -15k.  There have not been 2 straight negative readings since 2009.  However, there were many negative releases throughout the bull market of 2003-2007.  Possibly just another sign that manufacturing jobs losing their importance to broader economy

Though the market has been on a tear this year, payrolls day has actually been negative 6 out of 9 releases this year.  Part of that has been due to weak data, but there has also been a tendency to rally into the report, similar to this week.

Markets overnight

  • Quiet session ahead of payrolls.  Asia was broadly higher, following the U.S. price action, though there was a 30 minute flash crash in Indian markets (briefly down 16%), so India the only region that finished in the red (-0.7% by close)
  • Europe has been higher since the open, up 1% at 7:45am EDT.  SPX futures up 0.2% in sympathy
  • The dollar and Treasuries are flat, after both selling off yesterday during U.S. trading hours.  Commodities are generally lower, after a strong rally yesterday