NFP Day: Excuse to Sell?

Expectations for today’s November non-farm payroll data are for gains of 150,000, with economists forecasting a range of 100-200k, with Unemployment likely steady at 9.6%.

NFIB and ADP data suggest that smaller firms have begin to engage in more hiring. That is a positive factor long time coming. As noted yesterday (Will NFP Lead to More Capex, Hiring?), several months of good data could lead to a virtuous cycle in the economy.

In terms of the markets, the impact could be quite different. U.S. Markets have gained 3% over the past 2 days, making them ripe for profit taking. That’s a term regularly abused by the MSM during any selloff, but after 350 Dow points in two days, it might be warranted. (I would expect any sell off to be modest relative to the gains of the past week).

Markets face opposite risks from the Employment data than does the economy. The risk of a strong number is that it removes the incentives for the Fed to keep applying QE2 at full strength. If the economy shows a consistent strength over the next 3 months, the Fed may feel that additional liquidity and quantitative easing is no longer necessary. At a certain point, they may lift their foot off the gas pedal.

Perversely, a mildly disappointing NFP number might be a positive, as it suggests the full QE2 will be applied.


Employment situation is out at 8:30am

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