The December jobs report — released Friday morning by the U.S. Bureau of Labor Statistics — has the potential to move markets. After all, it's simply the biggest market mover of any economic data release on the calendar.
However, that potential has arguably diminished in recent days as markets have repriced expectations in the wake of better-than-expected employment indicators, as the table below illustrates.
Chief among them is ADP's monthly National Employment Report (released Wednesday), which estimated that 238,000 workers were hired to private-sector payrolls December — a number well above consensus expectations for a 200,000 print that also marked an acceleration in hiring from November's upward-revised 229,000 figure.
Since then, the Treasury market has come under pressure, and short-term interest rates have risen dramatically as traders pull forward expectations for when and how fast the Federal Reserve will begin to normalize its key policy rate from current levels between 0 and 0.25%, where it's been since the crisis.
In short, much of the damage a strong jobs number in Friday's report could inflict on the market may already be priced in.
The median estimate of 90 economists polled by Bloomberg is for net nonfarm payroll creation of 197,000 in December. However, 69 of those estimates were submitted before Wednesday's ADP release.
Of the 21 estimates submitted after the ADP release, the median estimate is 205,000 — a number that may provide a more accurate reflection of true expectations.
Deutsche Bank economist Joe LaVorgna and Pantheon Macroeconomics chief economist Ian Shepherdson, who share Wall Street's most bullish nonfarm payrolls forecast (both calling for 250,000), revised their estimates higher following the ADP release.
So, what sort of nonfarm payroll number actually could still move markets?
CRT Capital government bond strategists David Ader and Ian Lyngen conducted a client survey in which they asked investors which numbers had the potential to influence the Federal Open Market Committee's decision on how to proceed with the winding down (a.k.a. tapering) of its quantitative easing program (the FOMC began this process at its December meeting).
The survey revealed that on average, investors expect the FOMC will reduce its monthly rate of bond purchases by $10 billion again in January, as it did in December, unless the nonfarm payroll print comes in below 117,000.
Meanwhile, if the number comes in above 285,000, investors surveyed by the CRT strategists believe such an upside surprise could prompt the FOMC to accelerate tapering at its January meeting.
Wall Street's consensus estimate for the unemployment rate is for a reading unchanged from November at 7.0%. Average hourly earnings are expected to post growth of 1.9% from a year earlier, down from November's 2.0% year-on-year pace of growth. Average weekly hours worked is expected to remain unchanged from November at 34.5.
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