Perhaps the most notable development in the run-up to Friday’s jobs report is just how low the bar has been set.
The fact that the survey period over which the U.S. Bureau of Labour Statistics collected data for the report (the week that included the 12th of February) coincided with nasty winter storms has received a ton of attention on the Street and in the press.
Moreover, Wednesday’s economic data docket delivered two data points that further served to reduce expectations. The first one was payroll-processing firm ADP’s February National Employment Report, which estimated only 139,000 workers were hired to private-sector payrolls last month (below market economists’ consensus 155,000 forecast). The second one was the Institute for Supply Management’s February survey of non-manufacturing firms (the non-manufacturing sector accounts for around 80% of U.S. economic activity), the results of which were indicative of the first monthly contraction in hiring since 2010.
The median estimate of economists polled by Bloomberg prior to the pair of Wednesday releases predicted 150,000 workers were hired to nonfarm payrolls in February. The median estimate of those economists who submitted forecasts after those releases is 136,000.
What all of this means, as Millan Mulraine, deputy head of U.S. research and strategy at TD Securities puts it, is that “the market appears to be set up for a weak number, and a disappointing report will be taken with a grain of salt.”
Two investor surveys conducted by Wall Street bond desks over the past few days reinforce this view.
“This month’s pre-NFP survey was decidedly bearish, with more respondents eager to sell into a rally and looking for the next move in yields to be higher,” says David Ader, head of government bond strategy at CRT Capital.
“Specifically, 58% would look to sell if the market rallies after the number vs. an average of 38% over the last six months. That’s the highest portion of sellers into a rally since April 2009.”
A similar survey of clients conducted by interest rate strategists at RBS yielded similar results.
“Our nonfarm payroll survey results showed that 73% of those surveyed think the next 25 basis points in 10-year yields will be higher, marking the most bearish print ever recorded (data back to 2005).”
The upshot of these anecdotes is that investors are already positioned for a bad number, and would see an even worse number as an additional opportunity to fade the weather.
Below are consensus estimates for tomorrow’s release, compiled by Bloomberg:
- Change in nonfarm payrolls: +149,000 (+113,000 previous)
- Change in private payrolls: +145,000 (+142,000 previous)
- Change in manufacturing payrolls: +5,000 (+21,000 previous)
- Unemployment rate: 6.6% (6.6% previous)
- Change in average hourly earnings from a month ago: +0.2% (+0.2% previous)
- Change in average hourly earnings from a year ago: +2.0% (+1.9% previous)
The release is due out Friday morning at 8:30 AM ET. Follow it LIVE on Business Insider »
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