Payrolls: Pleasant Surprise or Disappointment?

The US nonfarm payrolls number later on Friday will likely make or break the stock market's timid attempts at a rebound after declines in the first days of this month, but predictions for the volatile figure are as far apart as ever.

The consensus forecast for the data, due to be released at 8:30 am New York time, is for job losses of 225,000 in August, a slightly better figure than July's 247,000 job losses, according to analysts surveyed by Reuters.

But as usual, individual estimates vary widely, with the most optimistic pointing to a drop of 100,000 and the most pessimistic forecasting a fall of as much as 365,000.

The ADP report released earlier this week showed a drop of 298,000, while weekly jobless claims were 570,000. The employment index of the services ISM, however, improved slightly to 43.5.

"For what it is worth, the ADP was utterly wrong last month. But that does not mean it will definitely be wrong this month," ING analyst Rob Carnell wrote in a research note.

"The consensus figure of – 225,000 has about as much chance of being right or wrong as our – 290,000 forecast, which by pure chance this month is in line with the ADP," he added.

The optimists point to the ADP's volatility and to a string of recent good data to hope for a figure higher than the consensus.

"We don't have enough faith in the ADP to justify changing our optimistic forecast," James Shugg, senior economist at Westpac, told CNBC. He expects job losses of 150,000 in August.

No Recovery Yet

The same "only" 150,000 job losses were predicted by Richard Yetsenga, regional FX strategist at HSBC. "When I say 'only', it's still obviously a lot of jobs, but the trend is in the right direction," he said.


However, the possibility that today's number will disappoint the markets is "far higher" than the possibility that it will be a pleasant surprise, Kirby Daley, senior strategist at Newedge Group told

"The reaction to the recent employment numbers showing signs of stabilization is being overplayed by market players and analysts. We are far from out of the woods on the unemployment front," Daley said.

Although the job losses numbers have improved compared with the dismal figures at the beginning of the year, they are still very bad compared to normal times.

"The move from stabilization of job losses to a recovery is a quantum leap," Daley said. "Markets have priced in a recovery scenario when a real recovery is not in sight."

Analysts have said the US is going through a painful readjustment, and without the tailwind of consumption the various stimulus packages cannot drive the economy. But the US consumer, making up 70 percent of the economy, has shifted the focus on saving.

And, unlike during the previous "jobless recovery" in the aftermath of the internet bubble burst, this time consumers cannot rely on rising house prices and easy credit to get resources to continue spending.

"I don't believe there is a recovery," Daley said. "Recovery requires jobs growth."