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US: Non farm payroll forecast - ING

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

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Rob Carnell, Chief International Economist at ING, suggests that the US Non farm payroll is likely to be another mixed survey, though not an outright weak one.

    Key Quotes

    “Data over the week has added a little more to our knowledge of what the US labour market has been doing since last month. 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.

    Indeed, the most recent Beige book appeared to dwell more on the difficulties of filling vacancies, than on employment growth. And there were also some suggestions that wages growth has picked up quite strongly in some regions.

    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. With so many moving parts to this calculation, this is not exactly a high conviction call.

    As far as the market goes, we would see it focussing more on the wages figure, rather than the choppy payrolls and flaky unemployment rate numbers. As such, this puts more pressure on the Federal Reserve to consider further tightening – probably not as soon as the 16 March meeting, but perhaps in line with our continued expectation for a 3Q16 25bp rate hike. Bond markets may start to see the Fed’s foot dragging as taking it behind the curve, and we may see the 10Y US treasury yields nosing higher again, steepening the yield curve.”
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