To: John Pitera who wrote (7398 ) 7/6/2006 11:33:29 PM From: Jon Koplik Respond to Prediction from "Daily FX" for maybe very weak "payrolls" number tomorrow morning ..............The last time we saw a drop this large was between June and July of 2004 and looking back to the month of July, non-payrolls were an abysmal 38k. Coincidently enough, the forecast at the time was 240k. Today, the forecast is not as large, but just as optimistic which raises the question of what we should believe more – the ISM or the ADP report? If you recall, on Monday, the employment component of the ISM manufacturing index also fell from 52.9 to 48.7 but analysts wrote that off as having an impact on the manufacturing portion of the payrolls report and not the headline index. However, now with the expansion in the service sector labor market moderating significantly as well, a potentially weaker number is just as likely as a stronger one. The two conflicting reports tell us that there will certainly be a lot of volatility tomorrow and raises the likelihood of payrolls coming out somewhere between 140-180k, which is not far from the market’s forecast. We do not think that it is going to be as horrid as the July 2004 number since jobless claims have been very low. Just today, we saw another print below 325k at 313k for the week ending July 1st. As we said yesterday, handicapping the report is really a coin toss and we prefer to concentrate on our reaction to the release. A weak number will probably have the most significant impact on the EUR/USD currency pair after today’s extremely hawkish comments from the European Central Bank, but also be careful of any revisions for the month of May. For a more detailed pre-nonfarm payroll analysis, see the special report section of dailyfx.com .
