Good morning,

  • Markets subdued ahead of US jobs report;
  • ISM numbers earlier in the week point to higher job creation;
  • Hourly earnings and hours worked also eyed, alongside unemployment;
  • Osborne makes last ditch attempt to reduce £1.7 billion bill.

Financial markets are looking a little subdued on Friday morning, ahead of arguably the most important economic release later, the US jobs report.

The markets did get a little boost on Thursday from some encouraging labour market data from the US, which showed productivity rising more than expected and new jobless claims hovering near multi-year lows. This follows data earlier in the week that showed the employment gauge of both the ISM manufacturing and services reports rising in October, which should be a good sign heading into the non-farm payrolls release.

As it stands, we’re expecting the NFP figure to show 231,000 jobs being created in October, which is pretty much in line with Wednesday’s ADP estimate of 230,000. Given the rare it is that these two actually align, particularly on the first release, I wouldn’t bank on the number being in line with expectations. In fact, given the other employment data, such as those above, I think we could see the NFP beat expectations. Regardless, we tend to see a lot of volatility around this release, unless the everything is exactly in line.

The other aspects of the jobs report are also very important, although some may steal the headlines more so than others. For example, the unemployment rate may often grab more headlines, but in fact, it could be argued that investors are more concerned with hourly earnings and hours worked because the Fed has emphasised concerns about both of these on numerous occasions this year.

The unemployment rate is expected to remain at 5.9%, although a surprise to the upside in the job creation figure may open the door to a drop to 5.8%. Quite often, the participation rate will have a big say in this, with a drop below the current 62.7% helping to drive the unemployment rate lower.

Average hourly earnings are expected to rise 0.2% on the month, which is pretty much in line with the long running average and should mean an annual increase of around 2% again. Average weekly hours worked is also expected to remain at 34.6 having crept slowly higher throughout the course of this year.

One other notable event today is the EU finance ministers meeting, at which UK Chancellor George Osborne will try and convince his counterparts that the UK should not have to pay the full £1.7 billion bill they have been handed and what they do pay should be done in instalments, rather than in full on 1 December. I don’t think he’ll have any more luck on the amount side than UK Prime Minister David Cameron had on the immigration debate with his fellow leaders this week, but he may be able to negotiate the payment structure, with some finance ministers sympathising with the UK’s situation.

The S&P is expected to open 1 points higher, the Dow 11 points higher and the Nasdaq 6 points higher.