Positive Jobs, Positive Dollar? Non-Farm Payrolls Preview

Non-Farm Payrolls for September 2010 could be positive for a change. This is the last time that the decennial census will disrupt the numbers. Here are the things to look out for in the monthly circus.

The number of employers that working on the huge decennial census project dropped from 83K to around 9K in the middle of September. This loss of about 74K will pull the number down, as it did in recent months. The dismissal of the remaining workers won’t have a significant impact in the next months, so this is the last time that the headline number will be disrupted.

The private sector will “compensate for the dismissal of these workers. We’ve seen moderate growth in recent months. Some indicators that have been released for September show that the private sector will continue hiring. It’s not all “doom and gloom”. Manufacturing PMI that was released on Friday showed that this sector is still expanding. We’ll get figures for the services sector later this week.

Last month’s ADP Non-Farm Payrolls release failed to serve as a hint to the official number – ADP showed a loss of private sector jobs while the official number was positive.  Also the weekly jobless claims remained stable, between 450K to 470K in recent months.

Headline number and private sector number

These numbers still aren’t enough for a serious recovery, but enough to make the headline figure positive. Economists expect an almost balanced figure of 3K, with a gain of 77K jobs in the private sector.

Given the recent numbers, I’m slightly more optimistic, and I think we’ll see a gain of 30K in the headline number and over 100K in the private sector.

The unemployment will probably continue to play second fiddle to the different components of the job data. After the rate ticked up from 9.5% to 9.6% last month, another rise is expected to 9.7%. This figure will have a negative impact if the rate reaches the psychological double-digit area of 10% or a positive impact if it drops to 9.2% or lower.

Forex Impact

During September, the US dollar was beaten by all the currencies. The Euro and the Aussie enjoyed this more than others, while the British Pound and the Canadian dollar lagged behind. The new week currently shows winds of change, as the dollar corrects its losses.

A positive Non-Farm Payrolls figure will mean that Ben Bernanke and his colleagues are likely to print less dollars to stimulate the economy, as they see signs of improvement. This will boost the dollar.

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A disappointment – negative NFP, will hurt the dollar, but the impact is likely to be more mild than a rise in case of a positive NFP.

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