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Jittery markets await September jobs growth data

Monster jobs number ahead: SocGen economist
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Monster jobs number ahead: SocGen economist

September jobs growth is expected to be back on track after a dip in August, with 215,000 nonfarm payrolls created in a broad range of industries.

Retail workers that were temporarily striking in the Northeast in August could show up as an additional 17,000 jobs in September, but they could be offset by the loss of about 8,000 jobs in the leisure industry from the shutdown of casinos in Atlantic City, N.J., economists said.

Economists also expect to see an upward revision to August's 142,000 jobs, and the unemployment rate should be unchanged at 6.1 percent when the employment report is released at 8:30 a.m. EDT Friday. The release of jobs numbers due Friday morning is expected to show 215,000 jobs added last month, based on the median estimate of economists surveyed, according to Dow Jones.


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Yet, there is a nervousness around the jobs report, after a choppy week in the equity market, and fears that Europe's weakness and China's uncertain growth rate could weigh on the U.S. economy. Stocks Thursday were little changed after Wednesday's selloff. The was barely changed at 1,946, and the Dow was down 3 points to 16,801, while the Nasdaq was up 8 points at 4,430. The small-cap Russell 2000, which fell into correction territory Wednesday rose 1 percent to 1,096

"I expect 220,000 and no change in unemployment at 6.1 percent," said Mark Zandi, chief economist for Moody's Analytics. "I think we'll probably get 25,000 on the upward revision this month and another 25,000 next month."

He said everything points to the fact the economy has been creating roughly 200,000 jobs for the past eight months, despite the blip in August.

Zandi said it would be a negative for market psyche if the number misses.

"It doesn't mean anything's changed but given the dark feelings out there, it will exacerbate those feelings," he said. "We've got a lot of weakish numbers coming out of the rest of the world, making people nervous. China's growth rate, Europe's gone flat again, a lot of the emerging markets are struggling to regain their footing…We're relying on the U.S. to be the engine of growth so if you have a weak jobs number, with no revision, it would fuel those concerns."

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Wells Fargo chief economist John Silvia expects to see 205,000 jobs and a revision to the prior month. "If you don't have the revisions and you have a number like 205,000, it definitely flags," he said. Silvia said economists would begin to reassess expectations for 3 percent GDP growth, if the jobs number were disappointing. He said he is concerned by the unexpected drop in consumer confidence to 86 in September from 92.4 in August.

Economists say a miss in payrolls would not change the course for the Fed at its October meeting, where it is expected to announce the final tapering of quantitative easing. But a recurring trend of weakness would become an issue as it heads toward rate hikes, mostly expected to begin in mid-2015.

"There's more risk of pushing the Fed back than bringing the Fed forward at this stage of the game," said David Ader, CRT Capital chief Treasury strategist. He said if the jobs number disappoints, expect more buying in the belly of the Treasury curvenotably the five-year notesince it reflects short-term interest rate expectations.

However, economists say the trend in weekly jobless claims, which fell to 287,000 last week from the previous week's 295,000, is a positive sign for job creation.

"If the job market were weakening, you'd see jobless claims rising, not falling. They're as good as any indicator and they're not telling us the labor market is slowing," said Deutsche Bank chief U.S. economist Joseph LaVorgna.

LaVorgna expects 200,000 nonfarm payrolls. LaVorgna said one clue to September's number is that tax receipts rose a strong 5.5 percent for the month. He does expect hours worked to stay flat, and he notes the jobs report in the last two Septembers was relatively weak but there was a snapback both years in October and November.

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Wage growth, a sign of a stronger job market, is also not expected to show much change. Mesirow Financial chief economist Diane Swonk said the composition of jobs however is improving.

She expects to see improvement in business services hiring and for professions like accounting.

Swonk said there already are concerns about GDP, even before the jobs report.

"The current quarter is adding up to 2.8 percent. I think at one point, people were expecting 3.5 percent," she said. "If we see 150,000 jobs and no revisions, I'll be worried. I won't be worried about Europe. I'll be worrying about domestic demand too. We're selling autos, but what else are we selling," Swonk said.

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Besides the jobs report, there is international trade at 8:30 a.m. Friday, and unlike jobs, that number has direct impact on GDP. Other data includes the ISM nonmanufacturing survey at 10 a.m.

Barclays economists expect 250,000 payrolls, and chief U.S. economist Dean Maki said he expects to see to growth even with strong jobs growth. "Even with our 250,000 payroll number, growth will be slower in the third quarter, and I think that needed to happen because the bounce in Q2 was unsustainable. I think we're seeing that show up in a lot of indicators right now. It's not a worrisome slowing. It just had to happen," he said, adding it looks softer after the second quarter bounce back from a negative weather impacted first quarter. Second quarter GDP has been revised to positive 4.6 percent.