Barrelling into October renewed covid-19 fears in tow, what will Friday’s nonfarm jobs report tell the markets about the US economy?
US
The markets are far more concerned about the pandemic, the threat of a second wave and the related likelihood of wider and more serve national lockdowns than they have been for months. On top of this, the US tech sector is still on shaky after a blockbuster summer. And the US has the added headache of November’s rapidly approaching election, the proximity of which appears to be stalling any hopes of a bipartisan covid-19 spending plan.
So, what does this mean for Friday’s nonfarm jobs report? Well, after last week’s flash PMIs suggested a slowing economy recovery, investors are desperate for reassurances that it hasn’t completely stalled.
The headline nonfarm employment change reading has been falling month-on-month, from a peak of 4.791 million jobs created in June, to 1.734 million in July and then, in August, 1.371 million. At that pace of decline, September’s figure could come in the wrong side of 1 million – still an unprecedented figure for any other period, but a huge disappointment by current standards.
Another element to watch is the unemployment rate. Avoiding the spike to 19.4% forecast back in May, it currently stands at 8.4% at the last count, with a far greater than forecast drop from 10.2% the month previous. If this starts to creep up, it could cause a wave of alarm from investors.
Before we get to that, the final few days of September see the CB consumer confidence number on Tuesday, followed on Wednesday by the final look at Q2 GDP – the last estimate showed a 31.7% contraction at the annualised rate – alongside the ADP nonfarm, pending home sales and Chicago PMI figures.
October opens on Thursday with the core PCE prices index, jobless claims and final Markit and ISM manufacturing PMIs, while Friday has the factory orders and revised consumer sentiment numbers join the jobs report.
Investors would also do well to keep any eye on September’s Chinese manufacturing and services PMIs in the early hours of Wednesday morning, as a potential pacesetter to how the month will close out.
UK
Though Boris Johnson has already recently announced some fresh restrictions, they were in essence tweaks to the current rules. The surging numbers of daily covid-19 cases in the UK would suggest stricter measures are almost inevitable, something the FTSE and pound will both be watching out for this weekend.
Beyond that, there’s the net lending to individuals number on Tuesday, the final Q2 GDP reading and current account figures on Wednesday, and the final manufacturing PMI on Thursday.
As for the corporate calendar, there’s Reach PLC (LON:RCH) on Monday, Ferguson (LON:FERG) and Card Factory (LON:CARDC) on Tuesday, and Boohoo (LON:BOOH) and Compass Group (LON:CPG) on Wednesday.
Eurozone
Attuned to wider market sentiment, the Eurozone-specific calendar brings with it German inflation on Tuesday, region-wide inflation on Wednesday, the final manufacturing PMIs on Thursday and the Spanish unemployment change reading on Friday.
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