US NFP Preview: 9 major banks expectations from the first major economic release of 2015

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 8, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – We are just a few hours away from the December release of US Non-Farm Payrolls data. The following are the expectations as forecasted by the economists and researchers of 9 major banks. After the recent run of strong economic releases, all the 9 major banks are expecting December NFP within the range of 175K to 210K with unemployment rate to stay at 5% levels.


    We forecast that private payrolls added a net new 210k workers (Consensus: 200k), with a 10k increase in government workers, implying that total nonfarm payrolls will gain 220k jobs (Consensus: 200k). We expect the unemployment rate to remain unchanged at 5.0% (Consensus: 5.0%). Last, we expect average hourly earnings to grow by a solid 0.28% m-o-m (2.8% y-o-y) (Consensus: 0.2% m-o-m, 2.8% y-o-y) as the labor market continues to tighten.

    TD Securities

    TD expects the US economy to create 193K jobs in December. While still consistent with the continued absorption of slack in the labor market, the pace of hiring is expected to slow relative to the last couple of months. Wage growth should also be relatively weak, rising by just 0.1% m/m due to unfavorable calendar effects. In recognition of the deceleration in economic activity through the end of 2015, we expect that the trend in hiring will slow to between 175K and 200K. Note that this deceleration is still consistent with the Fed continuing to withdraw stimulus, with the next 25bps hike expected in March.


    Our trading desk economists forecast non-farm payroll growth of 200K in the December report. That would put December’s result slightly below, but wholly consistent with, the short term and medium-term trends (the 3-month moving average +218K, 12 month average +220K.) While we look for an unchanged unemployment rate at 5.0% in December, the household survey, on which the unemployment rate is based, will include an annual seasonal adjustment revision which may impact the path of the unemployment rate in 2015. A very favourable base effect should contribute to a sharp pickup in the year-over-year average hourly earnings rate as well - in fact, our economists expectation for a +0.1% m/m advance would mark the lowest monthly growth rate of average hourly earnings since June but would still be enough to lift the year-over-year rate from 2.3% to a new multi-year high 2.7% y/y.


    Our own NFP model is giving us an estimate of 176k for today’s report which is a little weaker than the consensus but not weak enough to really spark any great shift in expectations. There are two more reports before we have the March FOMC meeting which is when the probability of a rate increase is much more finely balanced. A +/-50k from the 200k consensus is probably required in order to get any notable dollar move this afternoon.

    Deutsche Bank

    The focus in the US this afternoon will be on the aforementioned December payrolls print (where expectations are for 200k although the whisper perhaps slightly higher post the strong ADP earlier this week), while the usual employment indicators are released alongside including unemployment (expected to hold steady at 5%), average hourly earnings (expected +0.2% mom and +2.7% yoy – a rise of four tenths) and the labour force participation rate (no change expected at 62.5%).


    The early call is for a 200k increase in nonfarm payrolls, though due to favorable base effect, the average hourly earnings are expected to jump to 2.8% year-over-year, which would be the largest increase in six and a half years. It will likely sharpen expectations for the second Fed hike in March.

    RBC CM

    Non-Farm Payrolls is the key highlight this week as the market debates the pace and magnitude of Fed hikes this year (cons: 200k, RBC: 180k; cons private: 180k, RBC: 180k; unemployment rate: 5.0%, RBC: 4.9%; average hourly earnings: 0.2%m/m). Although RBC is a little below consensus for employment as the hiring bonanza in the retail arena ebbs, it is important to note that even at 180k, this is a clip that is more than double what is necessary to keep the unemployment rate steady, hence our forecast drift lower to 4.9%, which is right at the Fed’s “full employment” point.

    Lloyds Bank

    The consensus expectation is for a rise in payrolls of 200k and the stronger than expected rise in the ADP private sector employment measure points to upside risks. The unemployment rate, meanwhile, is expected to hold at its low for the cycle of 5%. The average earnings series will also be watched closely. This has started to drift up in recent months and other wage measures point to a faster pace of acceleration. A further rise in the annual rate of growth is expected for December.


    After turbulent week the markets could be even more sensitive to the key US data scheduled today. Strong non-farm payrolls well above 200k in December may fuel speculation that the Fed might not wait with another rate hike for too long after finally raising interest rates for the first time in almost a decade last month.

    Click here to read more about the NFP preview from our in house Analyst Srimoyee Pandit titled “Nonfarm Payrolls: December's data likely to show a drop in employment
    For more information, read our latest forex news.

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