Scotia: "Anything Goes" On Nonfarm Payrolls

Scotiabank writes that "often" it's a case that "anything goes" for nonfarm payrolls estimates, and note that the September report brings "even greater than normal challenges associated with trying to estimate a reading."

• As such they are below consensus with an estimated gain of 250k "but the scope for a downside miss may be greater than upside potential to this estimate."
• The upside risks are well known, including school reopenings and the end of unemployment benefits bringing many back to the workforce.
• But on the downside, there hasn't been "enough evidence" from states that ended benefits in July that they saw a material jobs pickup, and "there may be lags attached to both of these effects and there may be high caution around matters like assuming the kids will stay in school or that lost employment insurance benefits can't be bridged for a time while assessing pandemic risks and launching a job search."
• Overall, "the best trading strategy could well involve getting out the hockey stick diagrams on payoff matrices around upside and downside disappointments perhaps more skewed toward downside risk".