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February non farm payrolls added 313,000 jobs, the most since July 2016, what will the Fed be looking for in February's Employment report? Hourly earnings came in lower taking pressure off inflation but what of other risks?

NFP FEB 18

What to expect from these numbers in a wildly manic risk on/risk off scenario in the new year is more of the same. The U.S. dollar has it's own seperate issues and short term noise should be decyphered as such. Much of the run on commodities in 2017 was the weak US dollar and that continues in 2018.  Below are expectations and the ADP report to help compare. Earnings are key with the effect on bonds and the dollar to affect commodities and equities. The trick is determining whether it is temporary or game changing.

January US employment report

  • Release time 8:30 am ET Friday, March 9, 2018

Expectations Updated With Report

  • NFP 313k consensus 200k (prior 200k revised higher to 239k)
  • Private Payrolls rate 287k 205k prior
  • Unemployment rate 4.0% consensus 4.0% vs 4.1% prior
  • Participation rate 63.0% exp 62.7%
  • Underemployment 8.2% U6 prior 8.2%

 

  • Average hourly earnings y/y 2.6% exp 2.8% y/y exp 2.8% prior (revised down from 2.9%)
  • Average hourly earnings m/m +0.1% exp +0.2% vs +0.3% prior
  • Average weekly hours 34.5 vs 34.4 prior (revised higher from 34.3)

Expectations and Data Released Prior To Employment Report

ADP Private Sector Payroll By Sector Released Wednesday March 7 2018

Change in Non Farm Private Employment FebFebruary ADP Shows 235,000 Increase in Private Payrolls 

Mark Zandi, chief economist at Moody's Analytics Conference Call After ADP Report

Highlights

  • "Lots of jobs across the board,"
  • "Job growth is going to remain strong – it could even accelerate … because of the tax cuts and government spending increase"
  • National unemployment rate will tick down into "the low 3s by spring or summer 2019," 
  • "We're in store for very strong job growth going forward. Even at the current rate of job growth – 200,000 per month – that is well north of the growth in the labor force," 
  • "That means that unemployment and underemployment are destined to continue declining."
  • Should the tariffs be implemented as expected, with steel imports subject to duties of 25 percent and aluminum products getting slapped with a 10 percent tariff, Zandi expects 15,000 jobs "at most" to be generated in steel and aluminum manufacturing industries. But he said the "downstream industries" that don't directly create steel or aluminum but instead use it in their final products, such as automotive manufacturers, are likely to lose out on between 50,000 and 60,000 positions before all's said and done.
  • Those losses "digestible" and "no big deal." But the losses appear to outweigh the potential gains
  • "darkest scenario" ,,, "If we do see a response by our trading partners to an increase in tariffs on steel and aluminum, then the impacts will increase,"

ADP Employment By Industry Feb

Ahead of the US Jobs Report Friday Key Releases This Week:

  • Markit Composite PMI (Feb) 55.8 exp 55.9 prev 55.9
  • Market Services PMI (Feb) 55.9 exp 55.9 prev 55.9
  • ISM Non-Manufacturing Business Activity (Feb) 62.8 exp 60.0 prev 59.8
  • ISM Non-Manufacturing Employment (Feb) 55.0 prev 61.6
  • ISM Non-Manufacturing New Orders (Feb) 64.8 prev 62.7 
  • ISM Non-Manufacturing PMI (Feb) 59.5 exp 58.9 prev 59.9  
  • ISM Non-Manufacturing Prices (Feb) 61.0 prev 61.9
  • Factory Orders (MoM) (Jan) -1.4% exp -1.3% prev 1.8% 
  • Factory orders ex transportation (MoM) (Jan) 0.4% prev 0.9%
  • IBD/TIPP Economic Optimism 55.6 exp 58.2 prev 56.7
  • MBA Mortgage Applications (WoW) 0.3% prev 2.7%
  • MBA Purchase Index 238.3 prev 239.4
  • Mortgage Market Index 384.1 prev 382.9 
  • Mortgage Refinance Index 1,185.7  prev 1,168.5
  • ADP Nonfarm Employment Change (Feb) 235K exp 195K prev 244K
  • Nonfarm Productivity (QoQ) (Q4) 0.0% exp -0.1% prev -0.1%
  • Trade Balance (Jan) -56.60B exp -52.60B prev -53.90B
  • Unit Labor Costs (QoQ) (Q4) 2.5% exp 2.1%  prev 2.0
  • Beige Book 15:00
  • Consumer Credit (Jan) Exp19.20B Prev 18.45B

Due Thursday March 8

  • Challenger Job Cuts (Feb) prev 44.7K  
  • Challenger Job Cuts (YoY)  prev -2.8%  
  • Continuing Jobless Claims exp 1,921K prev 1,931K  
  • Initial Jobless Claims exp 220K prev 210K  
  • Jobless Claims 4-Week Avg. prev 220.50K

January's employment report showed the economy comfortably added jobs that absorbed new labor market entrants and the unemployment rate remained at 4.1%. Inflation on a 12-month basis continued to run below the FOMC's target of 2% with Janyary's core CPI reading indicated some firming of trend inflation towards the Committee's objective.

Source: AFP, TradersCommunity Data

From The TraderCommunity Research Desk

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