With just over half an hour left until today’s jobs report, here are the key Jan. payroll report metrics and expectations that traders and algos will be focusing on (for a long preview please see here):
- Change in Nonfarm Payrolls (Jan) M/M Exp. 175K (Prey. 156K, Nov. 178K)
- Unemployment Rate (Jan) M/M Exp. 4.70% (Prey. 4.70%, Nov. 4.60%)
- Average Hourly Earnings (Jan) M/M Exp. 0.30% (Prey. 0.40%, Nov. -0.10%)
The current market consensus for today is 175k although the range between economists is a fairly lofty 140k to 238k. Pointing to a potential upside surprise, recall that Wednesday’s ADP came in at a much better than expected 246k while the employment component of the ISM manufacturing also bounced 3.3pts to 56.1, so the whisper number is notably higher than the where the consensus, with some expecting a number above 200.
As always keep an eye on the other components of the report too. The market expects the unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom.
To us, the most importants item will be average average weekly – not hourly – earnings for production and non-supervisory workers, as well as hours worked for the group: in recent reports there has been a substantial decline in this series not captured in the main headlines.
Some of the more notable NFP forecasts of note, by bank:
- High Frequency Economics 210K
- Moody’s 205k
- Nomura 205k
- Goldman Sachs 200k
- Comerica 190K
- SEB 175k
- Barclays 175k
- Consensus 175k
- Credit Agricole 175k
- CIBC 175k
- BofAML 160k
- Deutsche Bank 150k
As RanSquawk reminds us, last month the NFP reported an increase of 156k jobs, lower than the expected historically substantial figure in December, following an increase in part time jobs through the holiday period. Wednesday saw the FOMC’s first rate decision of the year where, as expected, rates were kept on hold at 0.50%-0.75%. Noticeably recent rhetoric from the Fed, on job growth has taken a back seat with market focus now on less bullish expectations of inflation.
The Fed’s lowered concern to US jobs is set to result in a possibly cleaner move, with investors looking at the report its self as an indicator to US growth. Last month’s report was largely in line, with no shock figures and December’s average hourly earnings back as a positive figure, this has seemingly proved that November’s -0.10% figure was indeed an anomaly, yet still seen slowing from December.
Recent data has been under the microscope; noticeably this week’s ADP private payrolls saw a staggering 246K increase in jobs. Furthermore, growth was seen from the month’s US ISM manufacturing PMI, revealing increased employment in the manufacturing sector and with the four-week moving average of initial jobless claims showing a four-decade low (248K) with all the job figures seen this month implying a strong report.
Market Reaction
As ever with the NFP release, the headline is likely to garner much of the initial focus with algorithms and fast money moves jumping on any large discrepancies. An overwhelming strong report will strengthen the USD, which has seen some slowdown to the bullish pressure, with the DXY back below the 100.00 handle. With many forecasts between two and three hikes for the year and all talk in regards to inflation, equity markets could once again see 2016’s choppy trade as a weak report could highlight the inflation slack, resulting in even more of a reason for the Fed to resist three hikes.
Gold and treasury markets are likely to act in tandem with classic price action in regards to the NFP to be evident in flight to safety asset classes, with a strong report set to cause some risk on sentiment resulting in weakness in both gold and treasury markets. Participants are likely to keep an eye on fixed income markets, with tight trading ranges evident across the curve throughout December and January – with any discrepancy in either direction could result in some traction.
via http://ift.tt/2l2PMPi Tyler Durden