US NFP Preview: 7 major banks expectations from the February’s Nonfarm Payroll report

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 4, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    We are closing in on the February’s release of US Non-Farm Payrolls data. The following are the expectations as forecasted by the economists and researchers of 7 major banks. After posting a weaker than expected 151k in January, all the 7 major banks are expecting February NFP to print a number in between 100K to 205K while the unemployment rate is expected to remain in between 4.9% to 5% range.


    Incoming data suggest that we should see stronger job growth in February. For example, initial jobless claims have moved lower this month. We forecast that private payrolls added a net new 205k workers, with no increase in government workers, implying that total nonfarm payrolls will gain 205k jobs. We forecast that manufacturing payrolls declined by 5k in February, as regional manufacturing surveys suggest that activity in the sector remained sluggish on the month. We expect the unemployment rate to remain unchanged at 4.9%. Last, we expect average hourly earnings to grow by only +0.20% m-o-m (+2.6% y-o-y), paring back from strong gains in the prior month, and owing to unfavorable effects from a calendar quirk.


    The consensus is for a pick-up in the pace of job gains from the weaker than expected 151k gain in January. Our NFP model has given us a startlingly weak estimate of under 100k. Payrolls growth in the 3mths to February 2014 did slow notably to just 133k but the slowdown was temporary and jobs growth rebounded strongly in March 2014. The unemployment rate in or around 5.0% is more or less at full employment and there is already compelling evidence that the current level of unemployment is starting to lift wage growth.


    Today is primarily about US payrolls. The expectation there is for a rise of 195K, up from the disappointing print 151K last month, and with the headline unemployment rate staying at a cyclical low of 4.9%. Perhaps more importantly, average earnings are seen up 0.2% m-o-m after the previous brisk 0.5% reading, and so staying at an mediocre and unchanged 2.5% y-o-y.

    Danske Bank

    We estimate non-farm payrolls increased 160,000 in February, below the current consensus of 195,000. Job growth is driven mainly by private service payrolls, which we estimate increased 151,000 in February, up from the 118,000 increase in January. We see mixed signals from the service sector, as strong retail sales from January indicate that the domestic part of the US economy is still in good shape and consumer confidence remains at a healthy level despite the decline in recent months. In terms of the unemployment rate, we expect it to remain unchanged at 4.9%. Average hourly earnings have moved higher lately, which has bolstered the Fed’s confidence in the inflation outlook.We believe that the continued progress in the labour market will keep wage inflation trending higher but if February data shows stagnating or even slowing wage growth, it will further reduce the chance that the Fed will proceed with the hiking cycle anytime soon.


    ISM figures indicate a more positive picture for the manufacturing sector, though we have some doubts whether last month’s 29,000 rise in manufacturing payroll jobs can be sustained, and would imagine something closer to zero, if not a small decline, which might be more likely. The most recent ADP employment report showed an improvement on last month, but only by slightly more than 20,000. Putting this all together, we anticipate a stronger headline non-farm payrolls jobs figure. We see something of the order of +180,000, up from +151,000 in January. This would be a decent, but not remarkable outcome, and a little below the consensus +195,000. On top of this, we can see some upward surprise possible from the wages figures. We pencil in 0.3% MoM, taking the year-on-year rate up to 2.6% YoY, though we might be a little timid here. The unemployment rate is another matter, however. This drives off the parallel household sector of jobs growth, and this has shown a somewhat improbable 1.1 million increase in jobs over the last two months. We think the chances of a strong rebound in this figure are high, which could see this survey register a very low, or even negative jobs growth number. The labour force figures will likely move in the same direction as these employment figures, which could see the unemployment rate tick up slightly, unless accompanied by an offsetting fall in unemployment.


    The consensus calls for around 195k increase in US nonfarm payrolls. While it would be an improvement on the 151k increase in January, it would be the second consecutive reading less than 200k. This is not too worrying with the unemployment rate at 4.9%. Many economists project job growth a 150k a month or so is sufficient to absorb slack in the labor market and push the unemployment rate lower. In January, the details of the report, including the increase in earnings and hours worked, were better than the headline. The risk is that in February it is the other way around, with a better headline and softer details. Nevertheless, barring a significant surprise, we don’t expect today’s report to seriously boost the chances of a Fed hike on March 16.


    US labor market momentum is expected to remain stuck in low gear in February, with the economy adding a relatively modest 168K jobs. This will only be marginally higher than the equally disappointing 151K jobs added the month before, and it remains well below the relatively brisk 230K average monthly pace of jobs created last year. Much of the job gains should be centered in the pro-cyclical sectors such as professional services and retail, while government services should also add a respectable 12K jobs to the bottom-line. Employment in the manufacturing sector should decline modestly, falling 10K in February as some of the unsustainable 40K jobs added in January are surrendered. Despite the relatively subdued pace of jobs growth, this will still be consistent with further slack absorption in the labor market. As a result, wages should rise modestly gaining a further 0.2% m/m following the robust 0.5% m/m advance the month before. The risks to this call are to the downside. The unemployment rate should rise modestly, climbing to 5.0% from 4.9%, on account of weaker household employment performance. The overall tone of this report should be weak, reflecting the slowing in underlying US economic momentum, underscoring the case for caution at the Fed.

    Click here to read more about the NFP preview from our Chief Analyst Valeria Bednarik titled “Nonfarm Payrolls: focus this time will be on wages

    We also have live coverage of the NFP release lined up for our readers. Kindly Click Here to “Trade the nonfarm payrolls & US Employment reports - Live Coverage & Analysis”.
    For more information, read our latest forex news.

Share This Page

free forex signals