ADP and ISM non-manufacturing added an upside bias

The consensus estimate of economists in Friday's non-farm payrolls report is 184K. Normally, that number aligns closely with what markets are expecting but the September report, which will be released Friday, is an exception.

That's because data released Wednesday has caused the market to rethink what's coming. Namely, the ADP and ISM non-manufacturing reports.

ADP reported that September employment rose 230K compared to 184K expected. There are plenty of times when these two reports diverge but this reading was the best since February and it got the market thinking something positive is happening.

Moreso, the ISM non-manufacturing index is what convinced many market participants that the number could be high. The overall index was at the best level since 1997 and the employment component, which has a decent correlation with non-farm payrolls, was at the best since 1998 at 62.4 compared to 56.7 expected.

Economists at Morgan Stanley have already bumped up their forecast:

"The combination of a higher-than-expected ADP employment report and the strong ISM survey suggest upside risks to the employment report on Friday. Indeed, our US economists have revised their forecast for payroll growth higher to 206k."

Other economists, however, haven't revised their data. If you only take the economists who have submitted or revised estimates since yesterday, the consensus is 192K.

To me, that still likely underestimates what the market is thinking, which is something above 200K. Also watch for upward revisions to August, it's a tough month for the BLS because of temporary and returning workers and it usually tends to report low and is then revised higher.

Another factor is Hurricane Florence, which landed in mid-September. Economists at Nomura say it likely didn't have an effect.

"The hurricane's landfall on the last day of the BLS survey week (the week containing the 12th of the month) likely minimized the impact on employment as any worker who received a paycheck for that week would be counted in the survey. This stands in contrast with Hurricane Harvey and Irma last year, the latter of which made landfall at the very beginning of the survey week, resulting in significant disruptions to payroll employment," they write today.

Ultimately, the headline is going to matter less than wage growth. The consensus remains for 0.3% m/m hourly average earnings growth. A miss on that will swamp any reaction to the headline.