With all eyes hope-full-y transfixed on tomorrow's non-farm payrolls data and its confirmation-biased 'select-a-headline' post-data farce, we thought it worth a look at the noise in the signal and a reminder, as Bloomberg's Joseph Brusuelas notes, the annual benchmark revisions that will be published and likely obliterate everything we thought we knew about job growth (or lack of). As Brusuelas notes, the January jobs report is likely to be better-than-forecast because the weather-impacted December estimate will see upward revisions as firms probably made up for hiring postponed during the previous month. While weather effects may dominate the topline estimate, the underlying trend in hourly and weekly earnings is likely to remain quite weak since it’s not contingent on swings in seasonal patterns.
Via Blomberg's Joseph Brusuelas,
Temperatures in the U.S during January were warmer than normal through the end of the Bureau of Labor Statistics employment reference week ended Jan. 12.
The January jobs report is likely to be better-than-forecast because the weather-impacted December estimate will see upward revisions as firms probably made up for hiring postponed during the previous month. Almost 300,000 new jobs may be added because of the combination of revisions and catch-up hiring, versus the 183,000 forecast according to a Bloomberg survey of economists.
Looking at the previous jobs reports from the past 18 major winter storms, the BLS has revised upward its initial estimate two-thirds of the time.
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While first revisions to the initial estimates have not always been that impressive, the broad nature of the slowdown in hiring indicated by the December estimate suggests investors may see an outsized upward revision.
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While weather effects may dominate the topline estimate, the underlying trend in hourly and weekly earnings is likely to remain quite weak since it’s not contingent on swings in seasonal patterns. A weak earnings environment is partially a function of the large number of unemployed and underemployed people. On a yearago basis average hourly earnings are up 1.8 percent and average weekly earnings up 1.5 percent. Neither are encouraging if the 3.3 percent level of consumption posted last quarter is to be sustained.
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Lastly, the Department of Labor will publish its annual benchmark revisions to its comprehensive estimate of employment on Friday. That should add about 350,000 to the overall level of employment. Even so, the two-month average of the total change in employment should remain at or near the six-month average of 185,000 in private job creation.