Update: A little more about what’s “consensus”
08:30 US Hourly Earnings (Dec); consensus +0.1%
08:30 US Average Weekly Hours (Dec); consensus 34.3
08:30 US Unemployment Rate (Dec); consensus 9.7%
08:30 US Private Nonfarm Payrolls (Dec); consensus +179K
Original post:The jobs report is out at 8:30 AM today. Here’s what you need to know.
Well, first was that the November report sucked, with a reading of just 39K, well below expectations.
But the market shrugged it off, continued to rally throughout December, as most economic data continued to come in strong.
Since then we’ve seen weekly initial claims numbers continue to decline (we had the first sub-400K one in ages over the holidays). Then of course yesterday we got that ridiculously good ADP report.
But not all the jobs data has been unalloyed good, the Monster Employment Index was actually kind of weak.
Also, stuck in the middle of yesterday’s excellent ISM report was a fairly weak employment sub-component.
And of course today we got a tick up in initial claims, and some bummer retail data.
One other thing is that the ADP report has really got the optimism going, and so it’s likely the “whisper” number is way higher than official reports, making the odds of a miss more likely.
Here’s Deutsche Bank:
The weak November employment report—payrolls gained only 39k and the unemployment rate rose 0.2% to 9.8%—appears to have been an aberration in the sense that Q4 GDP estimates have moved meaningfully higher since then. We are currently at +3.5% from +2.7% previously, and there are upside risks to this number, particularly from improving consumption. The level of November real PCE is up 4.4% relative to Q3 (+2.4%), and indications are that December retail sales were robust; we are forecasting a 1.0% headline gain— the data are due next Friday. Thus, we believe there is a good chance that November payrolls are revised higher, perhaps by 50k, as that has been the trend. We believe December will show a decent bounce, more so if not for inclement weather during the employment survey week. We will be able to judge the weather impact from a series that is part of the Household Survey which totals the number of people who have a job but did not report to work because of inclement weather. Obviously, a 150k payroll gain combined with a +200k increase or more in “weather workers” should be construed as a very strong report.
Two areas where we should see strength are retail trade and manufacturing. The former was down 28k in November despite strong spending and reports of a step- up in holiday-related hiring. Perhaps the bulk of the retail hiring occurred after the November survey week—we are projecting a hefty 40k increase in December retail payrolls. The recent string of weakness in manufacturing—it has fallen for four straight months—is sharply inconsistent with what we have seen in the ISM survey where the employment subcomponent has been above 55 for an impressive 11 straight months. The last time this happened was in 1972-1973. Look for a relatively large 25k gain in manufacturing. Regarding government, we estimate that federal (+10k) hiring will offset state and local (-10k) firing, so our headline and private payrolls projections are the same at +150k. We also expect the unemployment rate to decline 0.2% to 9.6%, because the previous month’s run-up is inconsistent with the ongoing drop in continuing claims. This remains the case even if we account for extended and emergency benefits—the rate should be several tenths lower than where it has been running.
Business Insider Emails & Alerts
Site highlights each day to your inbox.