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US NFP Preview: 8 major banks expectations from the March print

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 1, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    We are heading closer to the release of US Non-Farm payrolls data for the month of March. As we get closer to the release, here are the expectations as forecasted by the economists and researchers of 8 major banks. After a recent dovish Fed speak from most of the Fed speakers including the chair Janet Yellen, this will be an important data to keep your eye to gauge the future direction of the US economy. All the 8 major banks are expecting March NFP to print a number in between 175K to 225K while the unemployment rate is expected to hover in the range of 4.9% to 5% range.

    Goldman Sachs

    We expect a 220k gain in nonfarm payroll employment in March, above consensus expectations for a 205k increase and in line with the average rate of employment growth over the last year. A further decline in jobless claims and improvements in the employment components of most business surveys were the highlights of the overall improvement in labor market indicators in March. The unemployment rate is likely to remain unchanged at 4.9%, with risks to the downside. Average hourly earnings are likely to rise at a trend-like pace of 0.2% this month, with a rebound from last month’s surprisingly soft print offset by negative calendar effects.

    Deutsche Bank

    Current market expectations for nonfarm payrolls are sitting at 205k which compares to the 242k number we got back in February. The unemployment rate is expected to hold steady at 4.9% and average hourly earnings are expected to rise +0.2% mom during the month. Our US economists are a little more cautious ahead of today’s release and despite the trend like ADP reading, have a below consensus 175k forecast for payrolls. They note that this would have the effect of lifting the unemployment rate back to 5.0%, while they are also slightly less optimistic with regards to the earnings data (expect average hourly earnings growth of +0.1% mom). They note that their forecast for below-trend employment is consistent with their meagre Q1 real GDP growth projection of 0.5%. Another interesting point they make is that they have noticed a recent tendency for the median consensus forecast for March to overestimate the initially-reported March payroll gain. In fact, they highlight that the median forecast for March has over-predicted the initial payroll figure in five out of the last six years.


    In March, employment indicators from the manufacturing sector point to fewer layoffs. Also, on a more broad level, initial and continuing claims data remain stable at very low levels. Currently, our March Private Payrolls tracking estimate points to another month of +200k job gains. Taking all this into account, we forecast that nonfarm payrolls added another 230k workers in March with 5k of those workers coming from the government sector, implying that private payrolls added 225k workers. We expect the pace of job losses in the manufacturing sector to slow to -2k in March from -16k in February. Although we expect strong job gains in March, we think it is a relatively high bar for the unemployment rate to trend lower in March due to the recent pickup in the participation rate. As such, we forecast the unemployment rate to be unchanged at 4.9% in March. Last, we expect average hourly earnings to grow by 0.24% m-o-m (2.2% y-o-y), rebounding from a 0.11% decline in February.

    Danske Bank

    We estimate non-farm payrolls increased 220,000 in March, slightly above the current consensus of 210,000. Job growth is mainly driven by private service payrolls, which we estimate increased 180,000 in March down from a high of 245,000 in February. We estimate the unemployment rate was unchanged at 4.9 % in March. Wage growth continues to be subdued despite the tighter labour market. Average hourly earnings increased 2.2% y/y in February as monthly wage growth slipped to 0% m/m. We expect wage growth to trend slightly higher over the coming months but, if continued, the increase in the participation rate seen over the past five months should ease the upward pressure on wages. We would be glad to see a rebound in the average workweek in March.


    The market is expecting nonfarm payrolls to rise by a healthy 210K and is looking for a 0.2% m/m increase in average hourly earnings.


    The main data release will be the March non-farm payrolls report where we expect the Easter effect to have a negative impact on the headline figure. We see the pace of hiring slowing to 180k from 242k in February, a flat unemployment rate at 4.9% and a trend-consistent 0.2% m/m gain in average hourly earnings. Consensus for Friday’s jobs data is currently 210k vs. 242k in February.


    March has a tendency to be a weaker month for nonfarm payrolls, as the creation of an average of 150K jobs over the last five years falls well short of the 200K+ average in both February and April. This dynamic is expected to be repeated this year, with a forecasted addition of just 182K jobs in March which is a step down from the 242K increase in the prior month. The unemployment rate should rise modestly, climbing to 5.0% from 4.9%, on account of weaker household employment performance. Wage growth should also be relatively weak, eking out a 0.1% m/m gain on account of the calendar effects that should again be unfavorable this month. Other indicators of labor market health such as aggregate hours worked should bounce back this month.


    The consensus is for March nonfarm payrolls to grow a little more than 200k. The fact that full employment is being approached is not evident in hourly earnings data, which is expected to sustain the 2.2% year-over-year pace. We expect average hourly earnings to begin rising again in Q2. We think there is risk of an asymmetric market reaction. That is, a strong jobs number probably won't impact the bond market or the dollar very much since Yellen has already played her dovish hand. However, a weak number could see further selling of the dollar and a rally in the bond market.

    Click here to read more about the NFP preview from our Chief Analyst Valeria Bednarik titled “Nonfarm Payrolls: who cares?

    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”.
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