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US Non-farm Payrolls Preview: Decline in employment seen in January

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet - The US non-farm payroll data will be released today at 13.30 GMT. Markets broadly expect to see a fall in employment in January. The jobs report in the past three months had shown substantial increase in employment. The unemployment rate has held steady at 5 per cent for some time indicating a robust labor market. However, the wage growth has not risen on expected lines and participation rate was noted to have stayed low.

    Markets expect non-farm payroll to have increased by 190k, down from 292k rise seen in December. The ISM PMI released this week showed continuous weakness in the manufacturing sector. It also showed employment in the manufacturing sector dropped to a six-and-a-half year low in January, thereby raising the fear that overall employment rate has probably dropped in the month of January ahead of the jobs report. The index measuring employment fell to 45.9 from 48.0,marking the lowest reading since June 2009. Economists had expected the reading to come in at 48. It is being feared that the overall payrolls might not have increased 190k in January as is being broadly estimated. Unemployment rate can be expected to dip to 4.9 per cent.

    Nomura believes that the public sector job gains seen in late 2015 were mainly on account of stronger demand for postal service workers during the holiday season. With the holiday season over hiring in this sector can be expected to have returned to a more moderate rate. Also, they expect jobs in the manufacturing sector to have dropped by 5k. It also likely that hiring in the construction sector which had grown in the later half of 2015 on account of warm weather, has receded as the warm weather conditions have been noted to be moving back to what is considered normal for this time of the year. Most of the job gain will be seen in the service providing sector, according to Nomura. Analysts at Nomura however expect average hourly earnings to rebound by 0.31% m-o-m (2.25% y-o-y) after declining slightly in December.

    Research team at RBS forecast non-farm payroll growth of 180K in January, below the consensus figure and well below December’s 292K increase. RBS sees decline in jobs mainly in three sectors likely transportation and warehousing, professional business services, and government employment. Like Nomura, RBS also believes average hourly earnings in January likely rose around 0.3 per cent month on month.

    13 major banks have put forth their forecast on January’s non-farm payroll and all of them expect to see a fall in employment within the range of 170K to 245K. Unemployment rate, according to some may dip to 4.9 per cent after holding steady at 5 per cent for years now. Goldman Sachs expect to see a fain of 170k. The unemployment rate, they feel will likely remain unchanged at 5.0% while average hourly earnings are likely to rise at 0.4% month-over-month. SocGen has sounded a little more confident than its peers stating that it expects payrolls to increase by 245k. It expects the unemployment rate to come in at the 4.9 per cent, a level that monetary policymakers generally associate with full employment. ANZ on the other hand expect payrolls to rise by 194k in January, and the unemployment rate is forecast to remain unchanged at 5.0%.

    The economic indicators that have been released ever since the Fed’s first rate hike in a decade in December, have not been impressive. US Consumer Price Index (CPI) slipped 0.1 per cent in December after remaining unchanged in November. The fall was primarily the result of a drop in prices of energy goods. Also, rise in the price of services remained moderate. Durable goods order fell. ISM manufacturing index dropped in January. PMI figures showed slack. These factors led New York Fed President William Dudley to state that subsequent rate hikes will be further delayed.If today’s data disappoints it will be certain that Fed will push its next rate hike further into the future. The Fed had in December said it intended to raise rates four times this year. Now that seems completely impossible given the current state of affairs.
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