Previewing Today's Payrolls Report

Below are the expectations of the biggest banks for today's Nonfarm Payroll number to be announced in just over two hours:

  • Morgan Stanley +135K
  • Barclays Capital +150K
  • Goldman Sachs +150K
  • Bank of America +160K
  • JPMorgan +165K
  • HSBC +179K
  • Deutsche Bank +180K
  • UBS +190K

A quick and dirty summary from RanSquawk:

US employment data throughout February has been relatively strong with February’s ADP employment change printing at multimonth highs at 198K. Last month’s figure was also revised higher from 192K to 215K. Weekly jobs data has also been positive over the last few weeks, indicating the US jobs market continues to make a recovery. Furthermore the employment subcomponents in both ISM surveys were strong, signifying hiring in the US continues to grow. However, last month also saw the unemployment rate increase to 7.9% from 7.8%, highlighting the fact that the US economic recovery is still in its early stages. Some analysts suggest the  snowstorm that hit the Northeast during the start of February could impact the figure although the above metrics show the weather influence on the figure could be lower than many first expected. On Wednesday, Deutsche Bank were projecting a -75K impact from weather, down to 125K, however following the ADP figures this week, have revised their forecast to 180K.


The unemployment rate could be the key figure to watch again following the Fed’s introduction of the “Evans rule”. As a reminder, at December’s FOMC meeting the Fed announced they would keep rates at record lows until the unemployment rate drops below 6.5%. However, FOMC voter Bullard recently said unemployment in the low 7’s could let the Fed end QE, although it should be noted Bullard has a hawkish stance. On the other hand, following Bernanke’s Humphrey Hawkins testimony, many Fed members, including Yellen, have said the Fed should press on with QE with benefits outweighing risks.

The market reaction is also quite clear:

A strong beat will send GETCO's (and Citadel's) collocated algos in a buying frenzy, as an improving economy with at least 9 more months of $85 billion injected in the economy each month (since Bernanke has made it clear he will not taped off QE no matter what, and not like he can anyway) means BTFD.

A big miss means even more perpetual QEasing, which in a market where only liquidity matters, will push GETCO (and Citadel) to buy some more.

A goldilocks number will certainly unleash a buying wave because with no incremental data, the recent momentum wave will have to continue no matter what.

A can't lose market.

And for those who care, here is a less cynical, if more worthless, preview of the NFP from Goldman:

Payrolls Preview: Moderate 150k Gain, Unemployment to Stay at 7.9%

  • We forecast a gain of 150k payroll jobs in February, a bit below the consensus forecast of +165k. The unemployment rate will likely remain at 7.9%.
  • In terms of potential leading indicators for Friday's number, despite the better-than-expected ADP report and a solid reading on the ISM services employment component, the four week moving average of initial claims was little changed from the January to the February survey week, while the ISM manufacturing employment index edged down and online job postings declined.
  • The sequester will probably not weigh significantly on February payrolls but will be more important in the coming months. The effect of the February blizzard in the Northeast will probably also be fairly minor.

We forecast a gain of 150k payroll jobs in February (vs. consensus +165k), similar to the 157k increase seen in January. This rate of payrolls growth is consistent with a moderate rate of economic expansion but is not sufficient to bring down the unemployment rate rapidly. The labor market series that we normally track as potential leading indicators for payrolls were fairly mixed in February, leaving us comfortable with our call for similar job growth to last month.

Round-up of February Labor Market Indicators


1. The ADP employment change was stronger-than-expected at +198k (vs. consensus +170k). As ADP measures private employment, subtracting off a small drag from government employment would suggest a total payrolls gain in the neighborhood of 190k. However, ADP over-predicted the private payroll gain last month by roughly 25k, and more generally, the utility of ADP as a leading indicator for payrolls remains to be seen following significant methodological revisions last year.
2. The ISM services employment component remained near post-crisis highs at 57.2 in February, suggesting solid expansion in service sector employment.


1. The 4-week moving average of initial claims for unemployment insurance was roughly unchanged from the January survey week to the February survey week (around 360k). Since then, the 4-week moving average moved down to 349k, with the Labor Department noting no special factors impacting the data. This will be a positive indicator for the March report if sustained.


1. The ISM manufacturing employment index ticked down to 52.6 in February (from 54.0), on the lower end of the range seen over the past three years.
2. The Conference Board's Help Wanted OnLine (HWOL) data showed a decline in seasonally-adjusted internet job postings of 44k in February to 5.057m.
3. The household survey data has been running weaker than the payroll survey over the past three months, with the payroll-consistent household measure (adjusted for definitional differences between the two surveys) showing an average monthly employment change of -152k jobs, compared with +200k for the payroll survey. Although the household employment measure is much more volatile than payroll employment, we have found lags of the indicator to have some explanatory power for current-month payrolls.

Weather and Sequester Will Probably Have Only Small Impact in February

The February print will probably not be impacted to a major extent by special factors, including weather and the sequester. The February 8-9 blizzard in the Northeast occurred just before the payrolls survey week. We believe that relatively few people were unable to report to work for the entire subsequent week due to the snow, and as such the impact on measured payroll employment should be fairly minor. However, initial claims for unemployment benefits in Connecticut rose by roughly 2,400k in the week after the storm, an outsized increase relative to normal volatility for the state.

On the sequester, the Pentagon noted as of February 20 that of the 46k potential cut to its temporary workforce, only 6-7k individuals had been laid off or were in the process of being laid off. The sequester impact that might show up in the February employment report would likely be somewhat smaller than that, considering that those "in the process" of being laid off are probably still counted as employed according to BLS's definitions, and we expect that other agencies have not been as proactive as the Pentagon on layoffs. However, there may be some impact, perhaps several thousand jobs, from announced hiring freezes preventing normal hiring that otherwise would have occurred. In coming months we expect the sequester to have a much more significant negative impact on employment, although probably somewhat less than the widely cited 750k estimate from the CBO. Anecdotally, this morning's Challenger, Grey, and Christmas mass layoffs report noted potential layoffs of 3,000 announced by aerospace company United Technologies Corp and 3,500 from BAE Systems, probably the leading edge of many more defense contractor job cuts.

Unemployment Rate Likely to Stay at 7.9%

The unemployment rate will likely remain at 7.9%. Although 150k on payrolls should be sufficient to reduce the unemployment rate slowly over time, last month's unrounded unemployment rate was 7.92%, meaning that a full 8 basis point (nearly one tenth) decline would be needed to push the unrounded rate down to 7.8%. Labor force participation has remained at 63.6% for the past three months, appearing to stabilize somewhat during 2012 following three years of declines. Our forecast is for a roughly stable labor force participation rate during 2013. A February decline in labor force participation would introduce downside risks to our 7.9% unemployment rate forecast.