Forecast distribution for US non-farm payrolls analyzed

The range of predictions is key for market reactions, as an unexpected outcome can cause surprise when the real figure differs from expectations. Another factor influencing how markets respond is how the forecasts are spread out.

Even if the data lands within the forecast range, it might still produce a surprise effect if most predictions were concentrated near the top end of that range. A result at the lower end can therefore still be unexpected.

Non-Farm Payrolls

• Forecast spread from -25K to 121K
• Greatest concentration between 30K and 70K
• Consensus stands at 56K

Unemployment Rate

• 4.2% (40% of forecasts)
• 4.1% (55%) — the consensus estimate
• 4.0% (5%)

Average Hourly Earnings (Year-over-Year)

• 3.2% (9% of forecasts)
• 3.1% (22%)
• 3.0% (50%) — the consensus
• 2.9% (19%)

Average Hourly Earnings (Month-over-Month)

• 0.4% (9% of forecasts)
• 0.3% (56%) — the consensus
• 0.2% (33%)
• 0.1% (2%)

While the NFP report is often one of the most significant economic releases for markets, next week's US CPI carries greater weight because the Federal Reserve's focus remains on inflation. Fed Governor Waller said on Wednesday that a strong CPI reading could push him to consider a rate increase at the September meeting. Officials have consistently stated that the labour market is solid and not a source of inflationary pressure.

A notable upside or downside surprise is likely required to generate a meaningful market response. In the former scenario, I would anticipate that markets would reverse Wednesday's moves and return to levels seen before Waller's comments. In the latter, we should see markets extend the Waller-driven moves as further dovish repricing takes place.