Thursday, March 6, 2014

Feb. '14 NFP Change Guesstimate ...

Estimating monthly change in NFP has become a dart-throwing contest as revisions continue and ... continue.  Our guesstimate for this Friday's report is a net change of 165K in NFP for February, compared with the 150K consensus.  It is tough to say how the market will react, as the 'weather factor' continues to discount the negative impact of economic data-misses on the equity market heavily.  And if there was no 'weather factor', then the probability of continuing the so-called tapering of the QE policies would decline.  Add to that the pro-QE attitude of new Fed Chair, Janet Yellen, and market participants remain risk-on knowing the Fed is their best and cheapest 'insurer', just in case the equity market tries to come back to reality.  

Related data has been mixed, at best.  The ADP figure missed estimates on Wednesday and seasonally-adjusted initial jobless claims increased in February.  While employment sub-index for the manufacturing ISM survey was unchanged, the one in ISM's non-manufacturing survey declined drastically and went below 50.  Employment index for most of the regional manufacturing and business surveys conducted by regional Reserve Banks also declined in Feb.  The only one that did not decline was Texas Manufacturing Outlook Survey's, conducted by the Dallas Fed.  Another bright spot has been the increase in total and new online help-wanted ads.  Although historically, most of these numbers' impact on NFP have lagged it between 30 and 60 days.  

Regarding some other expectations for Friday's BLS employment report: the 'official' unemployment rate is estimated to be unchanged at 6.6%, average hourly earnings are expected to have increased 0.2% from Jan., and average weekly hours worked are expected to have remained at 34.4 hours.

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