It is once again upon us, the once a month Friday Job Report. The significance of today’s jobs numbers is great with the United States Federal Reserve due to give us their interest rate decision rate on October 27 – 28.
The FOMC failed to increase the Fed Funds interest rate in September with the chairwoman of the committee, Janet Yellen citing concerns over weak inflation and the contraction in the global economy and more specifically the Emerging Market nations of China and more recently Brazil. Yesterday, the Department of Labor published a disappointing number which saw Unemployment Claims increase to 277,000. The market had expected an increase to 273,000, with the prior week’s number standing at 267,000. This afternoon Jobs Report, brought to us by the Bureau of Labor Statistics will include the Average Hourly Earnings, Unemployment Rate and the headline Non-Farm Employment Change. Will the September report give the US Federal Reserve the confidence to begin its much-delayed agenda to normalize the interest rate environment? The forecast is predicting that the US job market to add 201,000 places for September. However, traders will also be looking at the August number to see if there will be an upward revision to the rather disappointing 173,000 data release. The forecast for Average hourly earnings is that the pace of expansion will drop from the prior months 0.3% to 0.2%. The Federal Reserve will be hoping for an uptick in this data will be a signal that wage inflation is healthy and expanding at manageable levels.
The disappointing Unemployment Claims data was accompanied by an equally soft ISM manufacturing number. Although the market had predicted a decline from 51.1 to 50.8 the actual release was reported as 50.2. This brings the manufacturing sector close to levels of contraction. Yesterday was not all about disappointing data as the Total Vehicle Sales release of 18.2M beating expectations of 17.5M and the prior release of 17.8M. With the data being so mixed, the Federal Reserve will really need to see a Jobs Report that shows marked improvement and that is supported by substantial revisions to the August NFP data. The sentiment prior to today’s announcement points to the FOMC not taking any action on interest rates in 2015 with just 20% predicting a rise in October and 40% in December. With the members of the Federal Reserve leaning unconvincingly and without conviction towards an increase in 2015, today’s Jobs Report is going to give Janet Yellen and her team lots to think about.