Morning from Copenhagen – it’s NFP day!

The NFP report this time around is very similar to the report we received in October in the sense that it will be VERY technical in nature, making it tricky to have an edge around the print. We know that some of the weather and strike effects that impacted the October report will be reversed, but we generally don’t know if it will be reversed 1:1 or if the reversal is of a much smaller size.

On top of that, the ending of the Boeing strikes will likely impact the number heavily, and markets are currently expecting these factors to add around 125k to the report. This is likely why the consensus for the print is largely uniform across both qualified economists and the “whisper” number on Bloomberg (a user-based consensus figure). This leaves the underlying employment trends at around 100k monthly growth in payrolls, which is not strong if you ask us.

Because the report is so technical in nature, the print will not provide much value as long as it stays within ±50k of the consensus. Remember that right after the last print, the BLS stated it was impossible to determine how much of the change in payrolls could be explained by hurricanes and strikes—and the same thing is likely to happen later today.

This also means that the revisions to October will be equally important. We have the following playbook for today:

>275k: December cut will be doubted. 2yr moves 10+ bps, and 10yr moves 6-7 bps.
200-275k: Not a big deal for market positioning in rates, as this is the anticipated range.
<200k (and no major revisions to October): Markets price in December with high certainty and start pricing in a cut probability for January.

We find the outcome space favorable for a soft(ish) outcome accordingly.

Chart 1: Everyone seems to agree that the number later today will be strong