US employment data released on Thursday showed better-than-expected numbers adding more expectations to Friday’s NFP. Analysts from TD Securities argue payrolls probably rose strongly by pre-COVID standards, but they see some downside risk versus the consensus again this month.
Key Quotes:
“Payrolls probably rose strongly by pre-COVID standards, but we see some downside risk versus the consensus again this month, even with the 978k surge reported this morning for ADP. The ADP series has not been reliable a indicator of what to expect from the BLS.”
“The 978k surge reported this morning for ADP could raise expectations for tomorrow but, as usual, we advise against viewing ADP as a reliable indicator of what to expect from the BLS. The differential between the initial BLS private payrolls figure and the initial ADP reading (which is for the private sector only) can be relatively small sometimes, but extremely large other times: It was -524k in April (with payrolls +218K and ADP+742k) following +263k in March (with payrolls stronger than ADP), +348k in February, -168k in January, +28k in December, +37k in November, +514k October, +128k in September, +727k in August, +1295k in July and +2398k in June.”
“The USD has remained confined to tight ranges against most G10 currencies, but risks of a stronger dollar have edged up in recent days. Much will depend, however, on this month's jobs report. Our base case for a softer reading is likely to keep a lid on USD upside against the majors, but an unexpected upside surprise would likely attract renewed interest to cover latent USD shorts.”
“TD's below-consensus forecast puts this scenario in some doubt, however. If confirmed, our 500K estimate would likely be seen as a disappointment to those looking for a rebound from April's lacklustre report. Here, AUD and JPY stand out to us as likely candidates for a positive move as our reading of positioning and valuation currently looks more constructive here.”