Goldman's Payroll Preview: Optimistic But Worried About Weather

Tyler Durden's picture

Goldman forecasts a gain of 200k non-farm payroll jobs tomorrow (against a 196k consensus +/-25k). Factors arguing for a solid print include the recent trend, an improvement in most employment indicators already released for the month, the compressed holiday hiring period, and a potential "couriers and messengers effect." On the negative side, Goldman warns cold weather is a downside risk. With respect to other aspects of the release, in general they note that the December report has not shown an overwhelming tendency to contain back-revisions in one direction or the other; and forecast an unchanged unemployment rate at 7.0%, and a 0.2% month-on-month gain in average hourly earnings.


Top of the pile is the one and only Joe Lavorgna of Deutsche at 250k with Toby Dayton of LinkUp bringing up the rear with 100k (and apparently only 77 of the 90 estimates are from "qualified economists")


Via Goldman Sachs' Kris Dawsey,

A number of factors point to a solid report:

1. Sturdy recent trend. Payroll job gains have been running at 180,000 - 200,000/mo on a trend basis recently. Our labor market tracker, which aggregates a number of key labor market indicators into a single summary measure, was consistent with 190,000/mo payroll job growth on a three-month average basis through November.

2. Improving labor differential. The Conference Board's labor differential?the net percent of respondents in the consumer confidence survey reporting jobs plentiful vs. jobs hard to get?rose further in December, continuing its uptrend over the past two years.

3. Better ISM services employment index. Although the ISM services report taken as a whole was softer than expected in December, the employment component rose 3.3pt to 55.8. With most responses received late in the month, the improvement may also reflect on January payrolls given the early- to mid-month timing of the payroll reference period (pay period including the 12th of the month).

4. Strong ADP report. ADP employment posted a strong 238,000 gain in December, the strongest initial print since the index methodology was revised in 2012. Although a stronger-than-expected ADP report foreshadowed a larger-than-expected payroll gain in November, the ADP report has yet to prove itself as a reliable indicator of the official payrolls estimate.

5. Lower layoffs. According to the Challenger, Gray, and Christmas layoff report, announced job cuts in December were the lowest in 13 years, declining 5.9% year-over-year.

6. Compressed holiday hiring period. Because of the late timing of Thanksgiving and Black Friday, holiday hiring was likely somewhat more compressed this year between the November and December payroll reference periods. This could result in a stronger December gain.

7. Potential couriers and messengers effect. Seasonal hiring of couriers and messengers has increased significantly in recent years as an increasing share of holiday shopping is done online and as such must be delivered. This year, some large firms reportedly increased seasonal hiring above the levels seen in prior years. However, as shown in Exhibit 1 seasonal adjustment difficulty associated with the couriers and messengers category has resulted in increasing volatility in recent years. This is a significant question mark for the December report.

A few other signals were mixed to negative:

1. Higher jobless claims. The four-week moving average of initial jobless claims edged higher by 4,500 from the November to December reference weeks. However, initial jobless claims are typically volatile between Thanksgiving and the early weeks of the new year, so we take little signal from the uptick.

2. Mixed online job ads. The conference Board's monthly measure of online job advertising was mixed in December, with total ads rising but new ads falling. The data were similarly mixed on a three-month change basis.

3. Bad weather. Exhibit 2 shows the deviation in heating degree days from longer-term averages over the past several years. Weather was particularly cold during the December reference period, potentially subtracting around 10,000 from payroll job growth. Weather-sensitive sectors such as construction and leisure & hospitality (ex-ski industry) would be expected to show a disproportionate hit from colder-than-normal weather. The weather could also negatively influence the average weekly hours series.

The longer-term average revision to October and November payrolls found in the December report is roughly zero. However, over the past four years (post-recession) the average two-month revision in the December report has been +19,000, with substantial dispersion. Overall, the December report has not shown an overwhelming tendency to contain back-revisions in one direction or the other.

Regarding other aspects of the employment report, we expect the unemployment rate to remain at 7.0% (from an unrounded 7.0235% in November). Potential distortions to the unemployment rate associated with the expiration of emergency unemployment benefits would not become apparent until the January report. Average hourly earnings likely rose 0.2% month-on-month, in line with their recent trend.

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Dr. Engali's picture

Optimistic about jobs means they want negative job creation. After all good is bad, and bad is good in bizarro world.

thismarketisrigged's picture

gotta disagree doc, the market makes up its own rules whenever they want.


if the number is positive tomm, the market will go up and we will here the bullshit about how everything is getting better and jobs r coming back.


if the number misses, the market will go up as they will say, '' this is a positive for the market as the fed will prob slow down its tapering process.


everything is bullish in this market, including a nuclear war, tsunami wiping out entire coasts, u name it, its bullish.

Dr. Engali's picture

There is no doubt that everything is bullish in this crazy market, but more jobs means less QE ..... At least until the fed moves the goal posts again.

rocker's picture

Well, we did not get more jobs.  But, the real surprise is, "Goldman worried about weather".  How did they know. "Really".

Must be nice to have the FED's wallet and the governments insider reports to play at the casino.

Also nice to get bank status when your a high risk gambler with more debt than most other banks. Hmmmm. 

stock trout's picture

If the job numbers beat expectations the market will sell off, and if they are bad the market will rally. if you're an investor you want a bad economy, and if you want a decent job you want the market to tank. And if you're Goldman getting billions in new money every month, you don't really give a shit what the numbers are. 

holdbuysell's picture

Speaking of weather, the Sun just coughed up a rather large CME in Earth's direction, and a 'strong geomagnetic storm' is imminent.

Probably won't get too strong, but those who are paranoid may be on the lookout for a coincident EMP false flag that knocks out the power grid.

See links below.



Dr. Engali's picture

You won't find any paranoid people here. It's much worse than we thought.... Everybody really is out to get us.

ejmoosa's picture

But we added 219k last year in December when things were worse...

What the hell?

Things really are worse and they just think we cannot figure it out.  Wait til February 2014 when the number to beat is 332k.  Let's see how they spin it then...


CPL's picture

A field of dry reeds do not fear the storm, because they welcome the rain it brings.

ShortTheUS's picture

I saw 250K and immediately guessed Crazy Joe LaVorgna. Then I read the article and confirmed my suspicion.

q99x2's picture

Arrest Loyd Blankfein for treason against the world and everybody and everything--for treason against his brain.

Rising Sun's picture

I would be optimistic too, if my farts didn't smell so bad


Thanks for coming out GS - now go fuck yourself

Hugh Jorgan's picture

Save for the fact that the seasonal employees have now all been laid off.  I think they are way off-and if I am wrong-the books are cooked-Im in the midwest-and my state is bleeding profusely, in every vertical-take all those gift wrappers, the extra UPS drivers/mail sorters, etc-and throw them to the curb as demand has fallen off, add in the abysmal holiday sales season off 15% online, and you should have a print that looks like 1929.  Just sayin-anything that is good this week is all bullshit and more smoke/mirrors and horseshit from pinnochio in the oval office. 

1835jackson's picture

GS thinks 200k eh? So add another 100K. My guess therefore is 300k actually, lets make it 303k.