Why 200,000 Is the Key Level for Markets


Stocks have fallen in anticipation of Friday's US nonfarm payrolls report, breaking their long rally as fears that consumers will not be able to rebound came back in October, and one analyst said a selloff is likely if the figure is more than 200,000.

A consensus of economists surveyed by Reuters forecast a fall of 180,000 in September, compared with August's 216,000 jobs loss, while the unemployment rate was seen at 9.8 percent, closer to the 10 percent psychological mark.

Other analysts were even gloomier than the consensus, with Tim Harris, CEO at Harris Capital, forecasting a fall of 225,000 in September. "The US has already lost 7 million jobs," Harris told "Worldwide Exchange."

The weakness of last month's ADP survey, which showed that private employers cut a bigger-than-expected 254,000 jobs, suggests weak data, ING analysts wrote in a market research report.

"As ever, payrolls is too complicated a figure to make generalisations about market movements, but initial reactions do still tend to focus heavily on the headline number, and if this is minus 200,000 or more negative, could see bond yields fall and equities sell off, as Fed funds futures rally," ING analyst Rob Carnell wrote.

The unemployment rate will edge up again and possibly more than the consensus of forecasts suggests, according to Carnell.

"The psychological 10 percent rate may not be reached this month, but it is surely only one, or at most 2 months away," he wrote.

However, markets are volatile and sentiment may play a larger role than the actual number, Robert Barbera, ITG chief economist, told CNBC.

"If we're into a correction mode, we may be able to decide that the numbers are shaky rather than numbers being shaky," Barbera said.

"I don't think this is a number that would be right to change your attitude, a lot that's positive has happened," he added.