The range of estimates matters for market reaction because when actual data deviates from expectations, it creates a surprise effect. Another important input in the market's response is the distribution of forecasts. These forecasts are compiled from surveys of economists, and the distribution shows how strongly the crowd is positioned around each outcome rather than just the headline consensus.

Even within a range of estimates, most forecasts may be clustered toward the upper bound. In that case, a print that falls inside the range but at the lower bound can still generate a surprise effect.

Non-Farm Payrolls

• -25K to 121K range of estimates
• 30K-70K range most clustered
• 56K consensus

Unemployment Rate

• 4.2% (40%)
• 4.1% (55%) - consensus
• 4.0% (5%)

Average Hourly Earnings Y/Y

• 3.2% (9%)
• 3.1% (22%)
• 3.0% (50%) - consensus
• 2.9% (19%)

Average Hourly Earnings M/M

• 0.4% (9%)
• 0.3% (56%) - consensus
• 0.2% (33%)
• 0.1% (2%)

The non-farm payrolls figure measures the change in US employment excluding farm workers and some other categories, making it a broad gauge of labour market momentum. Average hourly earnings, the wage-growth component of the report, is closely watched as a signal of inflation pressure coming from the labour market.

Although the NFP report is generally one of the most market-moving economic releases, next week's US CPI will carry more weight because the Fed is focused on inflation. Fed Governor Waller said yesterday that a hot CPI reading would make him consider a rate hike at the September meeting. Policymakers have repeatedly said the labour market is stable and not a source of inflation.

A meaningful market reaction will likely require significant upside or downside deviations from expectations. In the first case, the market would be expected to fade yesterday's moves and return to pre-Waller levels. In the second, the market would be expected to extend Waller-driven moves on further dovish repricing.

Source: investinglive.com