Here is what the sellside is looking for when the BLS reports the January NFP in less than 30 minutes:
- UBS 200K
- Goldman Sachs 210K
- HSBC 225K
- JP Morgan 225K
- Credit Suisse 230K
- Deutsche Bank 240K
- Morgan Stanley 245K
- Citigroup 275K
And some more from RanSquawk [11]'s full preview of January non-farm payrolls:
- US Change in Nonfarm Payrolls (Jan) M/M Exp. 230K (Low 180K, High 286K), Prev. 252K, Nov. 353K
- US Unemployment Rate (Jan) M/M Exp. 5.6% (Low 5.4%, High 5.7%), Prev. 5.6%, Nov. 5.8%
- US Average Hourly Earnings (Jan) M/M Exp. 0.3% (Low 0.1%, High 0.4%), Prev. -0.2%, Nov. 0.2%
January’s report is expected to show a slower rate of jobs growth but still print above 200K in a continuation of last year’s strong employment trend. The median consensus for the headline figure is 230K with all analysts expecting average hourly earnings to marginally increase after a surprise decline was observed in December. However, recent economic indicators have not been too encouraging with the employment component of January’s ISM Non-Manufacturing release coming at the lowest since February 2014. Moreover, the employment index of the ISM Manufacturing release from the same month also significantly missed on street expectations. January’s employment data could be also impacted by seasonal adjustment issues if firms hired more workers over the holiday season than usual based on a view of improved economic conditions.
Last month’s FOMC minutes reiterated that the Fed is data dependent in terms of monetary policy moves while the statement also referred to the strength of the US labour market. Although the unemployment rate continues to approach levels indicating full employment, other measures including the underemployment rate and wage growth still indicate that a degree of slack remains in the economy.
Market Reaction
A headline reading above the median expectation of 230K and evidence of a return to wage growth could lift US equity markets and the USD in the short-term with the Fed indicated to stay on hold until at least June. Treasuries could also see some curve steepening in the aftermath of a strong employment report although 10-year yields have already seen their largest three-day increase since September 2013 as last month’s rally in fixed income markets appears to have halted despite Greek default concerns and volatile oil prices. If the report falls considerably short of expectations then it is possible this could see markets shift their expectations of rate-lift off by the Fed with the possibility of a June rate hike potentially being taken off the table, which subsequently could provide a more sustained reaction across US asset classes than previous reports.
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BUT
Recall that as we noted yesterday, "January Payrolls Have Missed Expectations 9 Of The Last 10 Times [12]"
The US chief analyst of Nordea, Johnny Bo Jakobsen, points out a curious [13]statistical finding: in the past decade, consensus forecast over-estimated January reading on 9 out of 10 occasions. As the chart below shows, the average overoptimistic consensus miss for January is just about 50K, with the last time consensus was lower than the final result taking place in 2012, and before that, one has to go all the way back to 2003 for the second payrolls "beat".
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