Jobs Report Disappoints Bigly, Earnings Miss Too, Sending Dollar, Yields Lower

Ok, one more hurdle to clear before everyone can put this week in the books and head off to the Apple store or the bar, with the latter being far preferable.

Actually they’ll be more econ after jobs, but the tone for the dollar and yields will be set by 9 and after that, the algos will take the reins. Notably, the 5s30s is sitting at post-crisis lows headed into NFP as absolutely no one seems to be buying the idea that Trumpian reflation is a real thing.

As we wrote on Sunday, it’ll be interesting to watch the extent to which traders are willing to discount this number the same way they did the dismal September print in favor of a focus on AHE – that will be especially fun to watch if earnings disappoint. In other words: if AHE misses, will everyone read that as a dovish surprise even if the jobs number is strong? Or will selective hearing allow folks to focus squarely on the headline number while discounting any concurrent weakness in wages?

 

The AHE print has been the market driver in five of the last six jobs reports. The September data saw average hourly earnings rise 0.5% M/M versus consensus of 0.3% – that was the biggest since 2008 and it triggered a more than 5bps move in 10Y yields, although Treasurys were eventually bid after a North Korea headline.

“We estimate nonfarm payrolls rebounded 325k in October, following a 33k decline in September and compared to three- and six-month moving averages of 185k and 160k, respectively,” Goldman projects. “Our forecast reflects a 150k boost from workers returning to their jobs after Hurricanes Harvey and Irma, which weighed heavily on September payrolls based on the state-level breakdown.” BofA is at 350k, Barclays at 325k.

Consensus is 313,000, no change on the unemployment rate (4.2%), 0.2%/2.7% M/M and Y/Y on earnings, respectively.

And without further ado, here are the numbers and it is a horrible miss:

  • U.S. Oct. Nonfarm Payrolls Rose 261k; Unemp. Rate at 4.1%

NFP

  • AHE 0.0% m/m, est. 0.2%, prior 0.5%

Earnigns

  • AHE Y/y 2.4%, prior 2.8% est. 2.7%

YYAHE

The reaction:

DollarYield

30Y yield falls below 50-day MA:

30y

Don’t worry, December is still in play.

Oh, and as you can see from the above, the streak is still alive thanks to revisions:

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