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BofA Expect Mixed Messages To FOMC From Payrolls

US OUTLOOK/OPINION
  • BofA forecast NFP growth of 230k in October after 336k, to “once again be narrowly driven by a few sectors: education and health, leisure and hospitality and government.”
  • Government could be softer vs recent months, seen at 30k after a three-month average of 71k, as it closes in on its pre-pandemic level and after a previously favorable seasonal factor from education-related hiring.
  • They see AHE rising 0.3% M/M (cons 0.3) and 4.0% Y/Y, “an upgrade from the prior two months but would not materially change the softer trend in wage growth”, with hours worked unchanged at 34.4.
  • They see the u/e rate falling a tenth to 3.7% (cons 3.8) along with an expected unchanged participation rate at 62.8% where risk is tilted to the downside. “The participation rate has recovered better than we initially expected owing in part to a strong increase in prime age (25-54) female participation rates. There is a risk that the end of daycare assistance could lead to less participation over coming months.”
  • Such a release would have mixed implications for the Fed: “An NFP print above 200k will continue to stoke concerns about a reacceleration of growth and inflation especially after the 3Q GDP print” but “if AHE earnings and other measures of wage inflation continue to ease then the Fed is likely to feel more confident that inflation is headed towards its 2% objective.
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