Forex Institutional Research: Goldman Sachs NFP Preview
Key quotes from the report:
Arguments For A Strong Report
Goldman Sachs NFP Preview: Jobless Claims. The four-week moving average of initial jobless claims leading into the payroll reference week declined from 285k in January to 273k in February. Initial jobless claims in the survey week declined by 32k to 262k in February
Reversal from negative quirks in January. We expect a substantial positive impact from reversals from the large January declines in private educational services (39k), temporary help services (-25k), and couriers and messengers (-14k). The January month poses particular seasonal adjustment challenges in these three sectors, and we believe that some of the weakness in these sectors last month was spurious.
ADP . The ADP employment report featured a 214k gain in private employment inn February, moderately above consensus expectations and slightly above the average over the prior six months. The 27k gain in construction jobs alleviates some concerns about a very large weather-related payback in the February payrolls report
Arguments For A Weak Report
Service sector surveys.The employment components of the service sector surveys were weaker. The employment component of the ISM nonmanufacturing survey dropped 2.4pt to 49.7 , and the employment component of the Markit PMI services survey also dropped. Among the employment components of regional Fed surveys, Dallas (-9.5pt to +0.5), New York (-0.8pt to 9.5, on a seasonally adjusted basis) and Richmond (-9.0pt to 9.0) deteriorated. Service sector employment grew 118k last month and has increased 189k on average over the last six months.
Weather. Winter weather swings can have large effects on payrolls, and wen previously estimated that unusually warm and snow-free weather boosted payroll growth by about 20k in October, 30k in November and 30k in December. We think that the actual weather payback in January — which also included an unusually warm reference week — was limited, consistent with the solid January 18k gain in construction employment. We expect a somewhat sharper February payback from warm weather in the prior four months, based on our measure of the heating degree day deviation (HDDD) that accounts for the timing of the payrolls survey.
Arguments For A Neutral Report
Manufacturing surveys. The employment components of the manufacturing surveys were mixed. The employment components improved in the ISM manufacturing (+2.6pt to 48.5) and the Empire survey (+12.0pt to -1 .0), while the employment components of the Philly Fed (-3.1pt to -5.0), Kansas City Fed (13.0pt to -20.0), Dallas Fed (-6.9pt to -11 .1), Chicago PMI, and Markit PMI surveys deteriorated. Manufacturing employment rose by 29k last month and has been roughly ﬂat on average over the last six months.
Online job ads.The Conference Board’s Help Wanted Online (HWOL) reported declines in both the number of new and total online ads in February. However, online ads were relatively stable in the prior four months (which appears empirically more relevant given the typical lag between the creation and ﬁlling of a vacancy).
We expect a 195k gain in nonfarm payroll employment in February, in line with consensus expectations—and a slight downward revision from our forecast at the start of the week. The unemployment rate is likely to remain unchanged at 4.9%. Average hourly earnings are likely to rise just 0.1% month-over-month, due mostly to calendar effects.
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