Over the last 12 months the sum of seasonally adjusted (SA) employment has exceeded the sum of non-seasonally adjusted employment (NSA) by 288k. The 12-month sum of SA NFP has been larger than NSA NFP for 25 months in a row. about half to two thirds of the accumulated SA-NSA gap will be reversed in the next three months. It implies NFP growth over the next three months would be 150- 200k in total less than without the signal from seasonal factors. This would mean that NFP growth in Q4 could be 50k lower each month than normally expected. Also in five of the last six years, the October error had the opposite sign to the September error. Also behind the 430k employment increases reported in the household survey (CPS) in the Sep NFP, there was a 785k jump in government-sector workers (SA), almost doubling the largest Sep number recorded for the sector since 1949. This no too now stabilise in the opposite direction. Also the NFP for October has the 12th Oct as reference week. The continuing claims for the 12th Oct week was at a 3 year high of 1897k. This too implies a higher UR & a lower headline NFP. For above reasons we expect headline Oct NFP at 40k & UR at 4.3%. We continue to expect Fed to cut rates by 25 bps each in the 4 meetings till March’25 & then a status quo. We expect a relief rally in 10yr UST yields post the NFP data by minimum 15-20 bps if pre NFP 10yr UST yields remain at 4.25-4.30 levels.
