Payroll Preview: Who Expects What
US Change in Nonfarm Payroll (Dec) Exp. 197K (Low 100K, High 250K), vs. Prev. 203K, October 200K
US Unemployment Rate (Dec) Exp. 7.0% (Low 6.8%, High 7.5%), vs. Prev. 7.0%
- Citigroup 165K
- Barclays 175K
- UBS 185K
- HSBC 191K
- Goldman Sachs 200K
- JP Morgan 215K
- Bank of America 220K
- Deutsche Bank 250K
Today's NFP and indication of labour market conditions will be the first key piece of data after the FOMC decided to begin tapering in December, and keenly followed as an indication of how the Fed may alter their bond-buying program at the next meeting at the end of January. The Non-Farm Payrolls six-month average now sits at 179.5K, however the past two readings have come in very near 200K, a mark noted by several on the FOMC as a consistent level needed to support the view of a "substantial improvement in the labour market" and hence justify another taper of the Federal Reserve's current bond buying program. There were a few special factors that affected the previous reading, with the BLS noting that among the unemployed, the number who reported being on temporary layoff decreased by 377K, which largely reflected the return to work of federal employees who were furloughed in October due to the partial government shutdown. In terms of this month's reading, the couriers and messengers industry could affect the reading due to online demand during the festival period, and notably this month’s report will include new seasonal adjustment factors for the household survey, which often leads to revisions to the unemployment rate over the past few years.
Recent employment data has been relatively well received, highlighted by Wednesday's better than expected ADP which was the largest increase since November 2012 and led to several analysts upping their calls for today's reading. Yesterday also saw initial jobless claims fall to 330K last week from a previous 345K, beating the median expectation for 335K. The unemployment rate is expected to remain unchanged at 7.0%, stabilising from the decline observed over the past few months and at its lowest level since November 2008 with an increase in the participation rate, a trend which could influence the reading seen today.
Although a knee-jerk reaction is often seen across asset classes following a beat or miss on the NFP headline, a sustained reaction will likely be driven by whether this data is interpreted as supporting or pushing back the view of tapering by the FOMC once again this month. Markets are currently pricing in a taper of USD 10bln again at the end of January, and a reading in-line and near 200K is expected to support this view. Only a large miss on expectation is likely to push back the view of another tape to the next meeting in March, however a decent beat on 200K is seen as increasingly the likelihood of a taper greater than USD 10bln.