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Goldman Payroll Post-Mortem: Fed Will Modify Forward Guidance, Possible June Rate Hike

Tyler Durden's picture




 

Via Goldman Sachs,

Payroll employment continued to grow at a strong pace, exceeding consensus expectations. The unemployment rate fell due to lower participation. With the final employment report in hand before the upcoming FOMC meeting, we think the Committee will modify its forward guidance on March 18. Our forecast remains for the first hike in the fed funds rate to occur in September.

KEY NUMBERS:

  • Nonfarm payrolls +295k for February vs GS +220k, median forecast +235k
  • Unemployment rate 5.5% for February vs GS 5.6%, median forecast 5.6%
  • Average hourly earnings +0.1% (mom) February vs GS +0.2%, median forecast +0.2%

MAIN POINTS:

1. Payroll jobs rose 295k in February (vs. consensus +235k). There was no significant negative weather effect apparent in the data, as construction employment and leisure and hospitality employment—the most weather-sensitive sectors—posted solid gains. By industry, the largest gains occurred in leisure and hospitality (+66k), trade, transportation and utilities (+62k), and professional and business services (+51k). Mining employment fell 8k, reflecting acceleration in energy sector layoffs, but representing only a small drag in an otherwise strong report. As expected, refinery strikes temporarily subtracted about 6k from payroll job growth.

2. The household survey showed a two-tenths decline in the unemployment rate to 5.5% (5.545% on an unrounded basis). The participation rate declined one-tenth to 62.8%. Employment according to the household survey—which is significantly more erratic than the payroll survey—rose 96k in February. The "U-6" measure of underemployment—including workers marginally attached to the labor force and those working part time for economic reasons—fell three-tenths to 11.0%.

3. Average hourly earnings rose 0.1% in February (vs. consensus +0.2%), leaving the year-on-year rate at a subdued 2.0%. Production and nonsupervisory earnings were softer: flat in February and up 1.6% over the past year. Average weekly hours were unchanged at 34.6.

4. With the final employment report in hand before the upcoming FOMC meeting, we think the Committee will modify its forward guidance on March 18. In our view, the most likely scenario is that the Committee replaces the reference to being “patient” in hiking the funds rate with new language that affords the possibility—without suggesting an overwhelming likelihood—of a hike as early as June. Our forecast remains for the first hike in the fed funds rate to occur in September.

5. With payrolls, unemployment claims, consumer sentiment and a number of business surveys in hand, our preliminary read on the February Current Activity Indicator is 2.8%, down from 3.2% in January.

*  *  *

We suspect Jan Hatzius will be trotted out to explain how this headline number is in fact terrible and The Fed should delay delay delay the removal of the punchbowl...

So much for that data-dependence... Boxed-in much?

 

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Fri, 03/06/2015 - 10:34 | 5861094 SheepDog-One
SheepDog-One's picture

Oooo the rate hike fan dance goes on....LOL!

Fri, 03/06/2015 - 11:11 | 5861240 pods
pods's picture

Watch them raise it by 0.0000000000000000000000001% and high five all around.

Or raise it 1%, have the CIA blow up Detroilet, then promptly slash it again "to help us."

That is how those bastards think.

pods

Fri, 03/06/2015 - 11:31 | 5861308 ThirteenthFloor
ThirteenthFloor's picture

No the press will say they raised it, rates to the public will rise. But the real rate to name banks will be zero. The public seems to believe what they read, that works for "them".

PS any banker attempts to whistleblow they fly fr a rooftop or be victim of nail gun suicide.

Fri, 03/06/2015 - 10:35 | 5861096 SickDollar
SickDollar's picture

I  must be living on a different planet, oh wait I am not part of the tribe oh it makes sense NOW

 

Fri, 03/06/2015 - 10:37 | 5861106 Philo Beddoe
Philo Beddoe's picture

Fisher speaks today no? Maybe he can Bullard this thing green before the close. 

Fri, 03/06/2015 - 10:40 | 5861110 Dr. Engali
Dr. Engali's picture

The fact that people have to pick up another part time job in order to survive does not mean more people are working. The record number of people who continue to rely on SNAP says it all. 

Fri, 03/06/2015 - 11:12 | 5861244 pods
pods's picture

Doc, if everyone worked, who the hell would go on Judge Judy?

Next you are going to say people should not pop out kids until they can afford them?

Crazy talk.

pods

Fri, 03/06/2015 - 13:04 | 5861722 Liberal
Liberal's picture

As a staunch liberal, I wholeheartedly agree that that's a crazy talk. Breeding is a human right. Getting a job is not. We look forward to the day when no one has to work. Let Obama and Oprah take care of our financial needs. Let the most beautiful First Lady ever Michelle feed us.

Fri, 03/06/2015 - 10:40 | 5861122 Singelguy
Singelguy's picture

It will be a very cold day in hell before the Fed raises interest rates. I am willing to wager that there will be another round of QE before a rate hike occurs.

Fri, 03/06/2015 - 10:40 | 5861123 IridiumRebel
IridiumRebel's picture

June 3rd 2022:
"Fed may raise rates in 2023" 

Fri, 03/06/2015 - 10:42 | 5861130 Armed Resistance
Armed Resistance's picture

Chance of a rate hike in June- 0.002%
Chance of a false flag before September- 99.92%

And a side bet says it's by Russia, Syria, N. Korea, Iran, ISIS, the SEA (remember them? Haven't been mentioned much since ISIS) or those dreaded "domestic terrorists" and "lone wolves".

Resetting the Ponzi system in 3,2,1...

Fri, 03/06/2015 - 10:42 | 5861131 papaswamp
papaswamp's picture

Thank goodness Gpa is back at work!
http://research.stlouisfed.org/fred2/graph/?g=139G

Fri, 03/06/2015 - 10:46 | 5861145 gwar5
gwar5's picture

The necronomy is just fine so don't forget to jack up the interest rates before you see any bubbles.....

 

 

Fri, 03/06/2015 - 10:46 | 5861146 BlueHen1990
BlueHen1990's picture

All this drama and analysis over 25 basis points. America has become so pathetic, gossiping and speculating over what a committee of a handful people will decide at their next "meeting".

Fri, 03/06/2015 - 10:50 | 5861160 RadioactiveRant
RadioactiveRant's picture

I know, its so inane.

Have you seen what Kims done with her hair?

 

 

Fri, 03/06/2015 - 11:14 | 5861257 pods
pods's picture

Wash the load out?

Strangle her narcissist husband?

pods

Fri, 03/06/2015 - 10:58 | 5861191 firstdivision
firstdivision's picture

In the past not so leveraged world, 25 bps wasn't anything to care about, in today's overly-leveraged world, 25bps implodes hedgefunds and banks.  Everything is too sensitive to the most minscule movements in rates. 

Fri, 03/06/2015 - 10:51 | 5861164 Jethro
Jethro's picture

Ha!  Its a report from GS.  Treat it like their "conviction buy" recommendations.  Those that buy into are going to get scalped

Fri, 03/06/2015 - 10:56 | 5861185 firstdivision
firstdivision's picture

The probability of a June rate hike is based on GS second half position. 

I would argue against a rate hike being possible as 1)It'll blow up Fannie/Freddie 2)Kill the NIM for the TBTF's 3)Kill housing that while hasn't recovered, has benifited.  The only reason that I can come up with for a rate hike is...if GS will profit handsomely from it.  So a rate hike is quite possible in June.

Fri, 03/06/2015 - 11:04 | 5861216 Bell's 2 hearted
Bell's 2 hearted's picture

"Average hourly earnings rose 0.1% in February (vs. consensus +0.2%), leaving the year-on-year rate at a subdued 2.0%"

for january it was +2.2% year over year

Fri, 03/06/2015 - 11:05 | 5861220 Yancey Ward
Yancey Ward's picture

I think the Fed is desperate to get some sort of rate hike put into place before the next recession arrives.  If they don't, then the entire intellectual rationale for ZIRP and QE is destroyed.  How can you have a recession with policy rates at zero?  If you can, then the Fed is going to be forced to produce negative policy rates, and when that happens, the game is done.

Fri, 03/06/2015 - 11:07 | 5861228 Buckaroo Banzai
Buckaroo Banzai's picture

We enter the next phase of the depression in September 2015. Negative interest rates here we come!!

Fri, 03/06/2015 - 11:05 | 5861222 Katastrofenhausse
Katastrofenhausse's picture

Translation: let's see what happens when we move this overinflated baloon into a room full of nails

Fri, 03/06/2015 - 11:05 | 5861223 Ban KKiller
Ban KKiller's picture

I don't think so....

Based on what? Ummm....let's see...my chickens are shitting more on one side of the pen? Sure, yeah, that is sound reasoning. 

GS? Fuck you all. 

Fri, 03/06/2015 - 11:21 | 5861288 FreeShitter
FreeShitter's picture

WWIII the shooting kind (which the pentagram is working on) before any rate rise. The game is over and a reset is coming.

Fri, 03/06/2015 - 11:58 | 5861430 iofera
iofera's picture

The quicker the Fed hikes rates the quicker this fraud of an economy will be exposed.

Just do it already!

Fri, 03/06/2015 - 12:04 | 5861453 One Eyed Jack
One Eyed Jack's picture

10/1 odds it will never happen

Fri, 03/06/2015 - 13:35 | 5861853 gcjohns1971
gcjohns1971's picture

They'll do a 'Surprise' rate hike sooner than June.

You see, there's what they say...and then there's what they do.

So, the Fed's trick is this:  How to raise rates (or appear to have raised them) so as to increase confidence in the dollar, but not get blamed for the recession that is already in the cards?

 

The fact is that everyone knows recession is already here...but they don't have to admit it until summer.

Course Of Action 1:

They do a 'surprise' rate hike...but it will be so timid and/or nuanced that there will be no clear tie to the downturn in the economy.

Course of Action 2:

COA 1 plus they crash someone else's economy hard enough that the foreign economy gets the blame for the recession.

 

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