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This week’s testimony by Federal Reserve Chair Janet Yellen may have caused a stock market sell-off by noting that the conditions seem right for that elusive fed funds interest rate hike in December. While Yellen left plenty of data-dependent and if-then suppositions to keep from having to commit to an interest rate hike, there may be a hidden message here — that the low payrolls report for September will not be repeated on Friday’s payrolls and unemployment report.

Before you think of this as a conspiracy, it is not. It is far from it. Government data of this importance may not be available down to the exact number each month three days before a key report is made, but you can bet what you are sitting down on that key Fed members do get sneak peaks regarding trends of a key economic report.

So, does that mean that the disappointing report from September was just a fluke? It could.

When the nonfarm payrolls was released for September, it was represented as only 142,000 payrolls added. The private sector payrolls report for September was even worse at 118,000.

What investors, economists and business owners have to consider here is that economic data gets revised. That also pertains to the weekly and monthly reporting from the U.S. Labor Department. If the expectations were closer to 200,000 and the report came in at 142,000 at a time when 200,000 had been more of the baseline for many reports, it seems highly unlikely that they would just say, “Whoops, it was really 200,000 after all.”

What seems likely is that the payrolls figure would be revised higher, maybe to 170,000 or so, and maybe to more than 150,000 on the private sector. Then whatever the report is for October comes with a muted reaction. At least that is what Yellen and the Fed presidents would expect.

It just seems unlikely that the Fed chair would sound like everything is snap-set ready for a rate hike without knowing that 1) a stronger payrolls report was coming on Friday or 2) that a less-bad revision for the prior dismal report was coming.

As far as expectations, Bloomberg has its consensus October readings pegged at 190,000 in the nonfarm payrolls and 174,000 on the private sector payrolls. Dow Jones has its consensus for the nonfarm payrolls at 183,000. Both Bloomberg and Dow Jones also predict that the unemployment rate will have dropped by 0.1% from September to 5.0% for October.

Also, this week’s report from ADP signaled that the prior month’s reading was not as weak as maybe they were looking originally. That said, TrimTabs was less positive in its payrolls reading.

One parting note here — not really a caveat, but just a simple fact of life. Trying to interpret “Fed-speak” is far from a science. Some Fed presidents have even used verbiage that is nearly unknown to describe a situation (like cupidity from Greenspan). So keeping a thesaurus and a dictionary around never hurts.

Stay tuned.

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