Today's nonfarm payrolls data – out at 8:30 AM ET in the U.S. – is the final jobs report before the presidential election on November 6.
Consensus estimates are for 125k new jobs, and the unemployment rate is expected to rise to 7.9 percent from 7.8 percent a month ago.
The election is already a huge source of uncertainty for fragile markets at the moment, and a bad jobs number could really set the tone for stocks ahead of the election.
Societe Generale strategist Vincent Chaigneau writes in a note to clients that " weak NFP and the US elections will be a challenge for the S&P, which is trading some 0.8% above key support levels (1400 area)...our economists look for a soft NFP, which would keep US equities shaky into the elections."
That economist is Michala Marcussen, who says she expects the unemployment rate to drop, but due to changes in the participation rate:
The US October employment report will be released as planned on Friday despite the disruptions caused by Hurricane Sandy. Our forecast is for a 90K gain on payrolls (below the 120K of consensus). At the same time, we look for the unemployment rate to decline to 7.7% - its lowest level since December 2008. The better trend on both Japanese and US unemployment rates, however, masks declining participation rates.
Taking a snapshot across the G4, generally low employment rates at first glance suggest historically high spare capacity on labour markets. Evidence suggests, however, that structural unemployment rates are trending higher, and notably on the European periphery, adding an additional headwind on these already hard hit economies.
Morgan Stanley economist David Greenlaw is optimistic, owing to recent jobless claims data:
The jobless claims data have displayed some significant weekly volatility of late, but the underlying trend in filings appears to have moved a bit lower. So, we look for a pick-up in the pace of private sector job growth in October. Meanwhile, hiring in the public sector is expected to slow relative to the past few months.
That’s because the recent advance in government jobs in seasonally adjusted terms appears to have been largely attributable to a reduced pace of teacher layoffs at the end of the 2011-12 school year compared with the 2008 to 2011 period. Now that the school year is well underway, this effect should become less evident. Meanwhile, the household survey is expected to show a partial retracement of the outsized gain in employment seen in September, leading to a slight uptick in the jobless rate.
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