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different from the mainstream view on wall street, citigroup still adheres to the "dovish" forecast, saying that seasonal adjustment issues amplified september's non-agricultural data, and the employment trend will be revised downwards in the next few months. this would result in the fed cutting interest rates by 25 basis points in november, and then returning to cutting interest rates by 50 basis points in december.

after strong september non-farm payrolls data, the market is confident that the federal reserve will cut interest rates this year.. traders have canceled bets on a 50 basis point rate cut in november and expect less than 100 basis points of cuts at the next four fed meetings. some investors even believe that the fed's monetary easing policy this year may have ended.

but citigroup still maintains its optimistic forecast. analyst veronica clark said september's non-farm payrolls report was very strong. considering that there is only one october non-farm payrolls report left before the november fed meeting, and the impact of hurricanes and strikes may cause the market to "ignore" october's weaker employment data,a quarter-point rate cut by the fed in november is now the most likely scenario. if next week's core cpi rises in line with the bank's forecast (up 0.3% month-on-month), the market may even begin to price in a pause in interest rate cuts in november.

but as far as september data is concerned,citi believes seasonal adjustments may have amplified the september data. lower turnover rates, rather than strong hiring, drove the employment numbers higher.

citi emphasized thatto maintain solid job growth and prevent unemployment from rising again, the fed needs to see an increase in labor demand (hiring).

but there has been a consistent (albeit volatile) trend of weakening demand for u.s. labor over the past year, most evident in declining hiring rates (which in august were at levels not seen since september 2008) , and the resulting rise in unemployment.

meanwhile, employment growth in september was mainly led by leisure and hospitality (+78,000) and health services (+72,000). that contrasts with declining hiring rates in both industries and falling actual restaurant sales in both quarters this year. employment in these industries typically declines after the summer.

the extremely low turnover rate shown in jolts data for august indicates that the turnover rate in the first two weeks of september may be particularly low. low turnover will mean strong seasonally adjusted growth, which is likely to be revised in october.

citi said the most encouraging part of the september jobs report was that the unemployment rate fell back to 4.05%. but there are still signs that labor demand remains weak in household surveys - unemployment durations are increasing again and job losses are still rising among younger workers. therefore, expect a sharper revision in the employment data and push the federal reserve to cut interest rates by 50 basis points in december.