02 December 2011 at 8:30 GMT
It's the first Friday of the month and you know what that means! The latest hard numbers, estimates, and 'guesstimates' on the US labour market are released in the afternoon, and given the recent improvement in (labour-related) economic reports consensus has buffed up its forecast to 125,000.
Eurozone leaders babble on: German Chancellor Merkel, who will speak before her native parliament today, and French President Sarkozy are pressing forward with plans for a stronger, more united Eurozone in an effort to dampen the contagious sovereign debt crisis spreading throughout Europe. While neither the ECB nor Eurobonds are officially on the table just yet, the pair seeks increases in surveillance and penalties for nations, which do not act according to the Eurozone statute.
Interestingly, both were among the first to break the rules in 2003 (apparently it only takes three years to forget to be disciplined) and both are
still running budget deficits. Indeed, Germany's deficit-to-GDP stood at 4.3 percent last year and is projected to decline to 1.8 and 1.4 percent this year and the next while France is expected to see a deficit-to-GDP of 5.8 percent this year and 4.55 percent in 2012, both above expected Eurozone averages. For some reason it always takes much longer to turn a deficit into a surplus after a crisis than vice versa, but we rest assured that Sarkozy's tough talk is enough to keep the vigilantes away from the doorstep of France this time; clearly they were just kidding in November when the 10-year shot up to a high of 3.82 percent (on 11/17).
While focus remains on Italy - with Greece halfway forgotten at the moment - we will follow the developments in deficit-to-GDP for both of the "tough talker'" countries as an unwelcome recession may just make the above (otherwise rather obtainable) consensus forecasts rather difficult to reach.
Consensus cautious on Nonfarm Payrolls: Enough about the troubles in Europe. Across the Atlantic things are looking rather well, relatively speaking, and today's report on employment is expected to confirm this view. The consensus forecast has only moved up to 125,000, however, despite a very strong report from ADP earlier this week which saw
private payrolls shoot above 200,000 for the first time since March to 206,000 while October was also revised upwards by 20,000 to 130,000. Given that ADP only handles private sector payrolls we need to add the change in public sector payrolls to this, and even then the average (absolute) error between ADP and NFP is still just north of 50,000.
The ADP report is not the only piece of good news, however, as Initial Jobless Claims have also come down since October. In the survey week in October claims stood at 404,000 (4wMA at 404,000) while they were 396,000 (4wMA at 395,000) in the corresponding week in November.
Temporary Help Services, commonly viewed as a leading indicator of overall payrolls, has continued to post positive changes in recent months as well, though at a more subdued rate than earlier in the expansion.
The household survey, from which the Unemployment Rate is calculated while payrolls come from the establishment survey, has recorded massive gains in employment in the last three months totalling 1.006 million. Though this series is much more volatile than Nonfarm Payrolls, the sheer size of the move recently points to more gains in payrolls. Adding to the general positive sentiment (again, relatively speaking and excluding confidence) in the US economy and the stars are aligned for a "consensus beat" in payrolls today.
