Payroll Preview: Who Expects What

Tyler Durden's picture

From RanSquawk:

The two most important consensus numbers:

  • US Unemployment Rate (Jan) Exp. 6.7% (Low 6.5%, High 6.9%), Prev. 6.7%, Nov. 7.0%
  • US Change in Nonfarm Payroll (Jan) Exp. 180K (Low 105K, High 270K), Prev. 74K, Nov. 241K

Broken down by bank:

  • HSBC 171K
  • Barclays 175K
  • Citigroup 180K
  • Bank of America 185K
  • Deutsche Bank 200K
  • UBS 200K
  • Goldman Sachs 200K
  • JP Morgan 205K

Today sees the release of the nonfarm payrolls report for January, which follows Decembers’s large miss on expectations at 74k versus a consensus of 197k. The Bureau of Labor Statistics (BLS) has acknowledged that weather conditions had a significant effect on last month’s reading. Ahead of the polar vortex in the US,  adverse weather kept 273k employed workers at home (versus a 10-year average of 166k) and temperatures remained lower than average in January, particularly in the first half of the month. The market reaction to another low reading may therefore be subdued, if it is believed to be representative of weather effects rather than economic fundamentals.

Wednesday saw a relatively strong, albeit lower than expected reading of the ADP report (175K vs. Exp. 185K), often considered to be a strong indicator of NFP because of the two data points’ methodological similarities. However, last month’s reading showed 238k, which versus an NFP reading of 74k represented the largest discrepancy between the two readings since Moody’s began compiling the figure in 2012; the average miss between the two releases is 50k. In terms of other data points, although this week’s ISM manufacturing missed expectations the major regional manufacturing surveys from New York, Philadelphia and Chicago were all better than expected, and the ISM non-manufacturing reading was also higher than consensus, with the employment component rising to 56.4 (prev. 55.6).

In terms of the unemployment figure, last month’s drop from 7.0% to 6.7% was the largest decline since December 2010. Consensus currently points to an unchanged reading this month, however, the figure may be influenced by the expiration of emergency unemployment benefits at the end of December. A proportion of the 1.3mln people whose benefits came to an end will have left the labour force if unable to find work, which if proved true could have the effect of reducing the unemployment rate.

Market Reaction

With the Fed now seemingly on a USD 10bln per-month tapering path, participants may view the central bank as less likely to be influenced by the report than previous months unless the reading falls far short, or far exceeds expectations.

As a result, a strong reading indicative of a healthy labour market will likely see a knee-jerk reaction higher in US equities and the USD, and downside in Treasuries and gold. A reading largely influenced by weather conditions in January could mean the initial fast-money moves will fail to be sustained, although a large beat is likely to support the view of another taper by the FOMC at their next meeting in March. Another drop in the unemployment rate, which would edge closer to the Fed's 6.5% unemployment threshold for the first Fed funds rate hike, is unlikely to cause an aggressive shift towards the view of a near-term rate hike due to the fact the Fed continue to reiterate that the Fed will maintain accommodative policy for some-time to come yet.

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DaddyO's picture

Does it really matter in the end?

DaddyO

Newsboy's picture

US can't borrow this afternoon.

There go the paychecks.

spastic_colon's picture

195k+ and UE 6.9 or 85k and UE 6.2.......only choices that make everyone happy

jbvtme's picture

they knew the number would suck. that's why they ran it yesterday

TruthInSunshine's picture

Don't be surprised to see an incredible print that is impossible to reconciled logically.

After all, statistical GIGO modeling is the means to the" print" end, now.

DaddyO's picture

It's all Unicorns and Skittles from here on out...

DaddyO

SoilMyselfRotten's picture

As for bank predictions.....a swiiiiiiing and a miss

Headbanger's picture

No it doesn't matter now cause the economy is collapsing and the Federal Reserve and US Gubmint blew their wad trying to save it the past five years.

So the next phase will be austerity but it will be called something more palatable like "Debt Reduction" or "Budget Efficiency"

Sudden Debt's picture

HOW DARE YOU SAY THAT!!!


I SWEAR TO GOD THAT AFTER THE PUBLICATION OF THE EMPLOYMENT NUMBER THAT YOU'RE FIRED!!!

The Dunce's picture

Looks like they were all wrong.  Bitches.

jubber's picture

whatever the figure the market will end up

Dr. Venkman's picture

I predict two. Two people found jobs. Mainly due to companies failing to anticipate the new year celebrations. Most economists failed to predict that January 14 was on the calendar this year, which explains the skew.

Edit: I was almost closer than the Morgue.

101 years and counting's picture

they'll accidentally print the "#N/A" results that came up in the original Excel formula.  then they'll flash the +240K goal-seeked number.  and everything is a-ok.

mayhem_korner's picture

 

 

What is John Williams's expectation?

Ness.'s picture

Stocks up, gold down.  The number is irrevelant.

mayhem_korner's picture

 

 

Will they White OutTM the decimals in the "official" number in the press release?

Seasmoke's picture

I see the market reaction summary, has gold down in every possible scenario.....how is that even possible ???

DaddyO's picture

If you had a vested interest in keeping PM's surpressed and also had control of MOPE through the MSM, what would you do?

DaddyO

zaphod42's picture

DaddyO!  Surely you don't think there is a conspiracy? 

I am Shocked!  SHOCKED, I tell ya!

Craig

shitco.in's picture

Boating with Bitcoin, an accident is as easy as getting your private key wet.  Be careful out there. 

adr's picture

I'm going to say 198k.

The number is meaningless and doesn't represent anything real. The number is created to manange expectations on Wall Street. If some big players have bought back in, the number will be whatever it needs to make them maximium profit off their trades.

Cortez's picture

113k.  Bullish.  Taper reduction rate off.

Sudden Debt's picture

DIDN'T McDONALS HIRE? OR WALLMART?

ENGINES OF AMERICAN GROWTH WHERE ARE THE!!!

OH OBAMA, OBAMA!!

zaphod42's picture

Hah!  at 171,000 HSBC not even close to the dismal reality. 

Must have been the weather.  It was wintery.  Oh, wait!  It IS winter!!!

Waiting for the lies to 'splain this away!

Craig

Common_Cents22's picture

No way, these banks should all be investigated for collusion.

 

No way jobs print over 120k

 

the market will rally in hopes things are bad enough to halt the taper.   stocks to 18-20K melt up before the huge collapse.

Van Halen's picture

So if I am correct, the answer was 113K? And that means that not one of these guys in the list above, with all their smarts and degrees and experience, were even close.

eucalyptus's picture

i applied for the russell economist job since the previous one made an 'opening' himself.

no responses yet.

:(