NFP preview: We estimate a 170K increase in October - Danske Bank

According to analysts from Danske Bank, Friday’s NFP will be an important input for the Federal Reserve December decision on whether to raise interest rates or not. 

Key Quotes: 

“The October jobs report is due out on Friday (13:30 CET) and will provide important input in the Fed’s decision as to whether it hikes or not in December. Thus, we may change our current call for ‘no Fed hike’ this year after the release.”

“Claims figures continue to signal job growth well above 200,000 while the PMI employment index for October points to only modest growth of just above 100,000. We estimate job growth was 170,000 in October (in line with consensus), slightly higher than September’s growth of 156,000 jobs.”

“There is a sharp division among FOMC members regarding their views on labour market developments. The hawks are arguing that monetary policy needs to be tightened, as the economy risks overheating if not. In addition, the very low rates increase the likelihood of asset price bubbles. The doves, on the other hand, argue that the economy still has some ‘room to run’ as there is still slack left in the labour market. The subdued core inflation and slow wage growth means the Fed can afford to stay patient. Recently, Fed Chair Janet Yellen expressed the idea of letting the economy overheat a bit in order to undo the negative supply side effects caused by the financial crisis.”