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After Mr. Bernanke's speech last week markets are all focused on the ECB meet on the 6th, but will immediately turn back to the US nonfarm payroll report. Based on Mr. Bernanke's statements, his main concern and reason for offering up monetary stimulus would be to create jobs.
The data will be released on Friday, and even more attention will go out to the labor market data with the ADP and unemployment reports scheduled for release prior to the Nonfarm.
After months of disappointing reports, the payrolls finally brought some good news last month. Employment growth picked up from a very slow pace of around 75 000 on average in the second quarter to 163 000 in August, beating the consensus which was looking for an increase in nonfarm payrolls by 100 000.
Also the breakdown showed some signs of improvement, but the question is whether the positive development can be confirmed. There are indications that the weather-related strength late 2011 and early this year boosted the payrolls, which was followed by payback later on. The weather related distortions might have faded now and the payrolls should hover again towards more normal levels in the coming months.
For August, the consensus is looking for a gain in private employment by 125 000 down from 163 000 in July. The difference will mainly be based in the manufacturing sector, where employment growth is expected to have slowed from 25 000 to 10 000.
The consensus looks quite fair to us, but we believe that the risks, if there are any, might be on the downside of expectations.
The ADP report, on Thursday, might give us further indications about what to expect from the payrolls, although lately it has not been a good leading indicator.
Also on Thursday, US initial jobless claims are forecast to continue to hover sideways, around the 370 000 level. In the week ending the 1st of September, initial jobless claims are expected to have dropped by 4 000, from 374 000 to 370 000.
Thursday's data will follow on the heels of the ECB meeting and statements by Mr. Draghi, so it promises to be an interesting end of the week.