Previewing Today's Nonfarm Payrolls Number: The Key Things To Look For

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From RanSquawk

Today's consensus expectations:

  • Change in Nonfarm Payrolls (Apr) Exp. 218K (Low 155K, High 292K), Prev. 192K, Feb 197K
  • US Unemployment Rate (Apr) Exp. 6.6% (Low 6.5%, High 6.8%), Prev. 6.7%, Feb 6.7%

What the banks expect:

  • UBS 180K
  • HSBC 195K
  • Bank of America 215K
  • JP Morgan 220K
  • Goldman Sachs 220K
  • Citigroup 225K
  • Deutsche Bank 240K
  • Barclays 250K

Quick take:

  • Headline expected at 218K, just below Wednesday's ADP employment change came in at 220k, the highest reading since November
  • Today's job report is not expected to alter the course of Fed monetary policy, especially as the June jobs report will be released before the next FOMC meeting
  • The April jobs report is the first this year which is not expected to be significantly influenced by weather conditions, as April was the first month since the winter that populous regions of the US did not experience a storm

Today sees the release of the US nonfarm payrolls for April, which is expected to show 218k jobs added. However, ahead of the figure analyst forecasts are quite evenly spread, with the majority lying between 195k and 230k.

The vast majority surveyed also expect the unemployment rate to decline to 6.6% from 6.7% in March, although the labor force participation rate (prev. 63.2%) has historically been a significant driver of a fall or climb in the unemployment rate.

In terms of recent data points, Wednesday's ADP employment change came in at 220k, the highest reading since November. The ADP report shares a very similar methodology to NFP, and although the correlation has been questionned in recent months, last month’s ADP reading was just 1k below the payrolls reading at 191k. Additionally, as noted by analysts at Deutsche Bank, the ‘jobs plentiful’ component of US consumer confidence is often a strong indicator of NFP, and that figure came in lower than previous on Tuesday at 12.9% (prev. 13.1%).

An additional point to note is that April was the first month since the winter that populous regions of the US did not experience a storm. Severe weather conditions were cited as a constraint on hiring during Q1, and Wednesday’s large GDP miss (0.1% vs. Exp. 1.2%) is widely being attributed to this factor. The BLS says volatile employment trends around the spring break period, rather than weather conditions can also account for yesterday’s higher than expected initial jobless claims for the week ended April 26th. Prior to that reading, the four-week average of weekly claims was at a post-recession low.

Market Reaction

As the Fed remain on track to taper their bond buying program, and with markets sensitive to projections for the first hike to the Fed Fund Rate (FFR), focus will likely fall on the unemployment rate unless the headline is widely away from expectation. An unemployment rate outside of the main expectation range will likely see a sustained reaction, and an adjustment to the current forecast, with the first hike of the FFR currently priced in for July 2015.

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Finally, as compiled by Bloomberg, here are the Twitter forecasts: