It’s never too early.
It’s never too early to start getting excited about a Non-Farm Payrolls report — the last of which (for November) was a huge dud.
So what about Friday? Well the official expectations are for a gain of 135K jobs.
Deutsche Bank has you covered on what to know.:
We have a below consensus forecast on December payrolls for a couple of reasons: One, there has been a tendency for payrolls to be revised higher. In the October employment report released in November, nonfarm payrolls were revised up a cumulative 110k over the previous two months. In the November employment report released in December, nonfarm payrolls were revised up a cumulative 39k over the previous two months. In light of this recent trend and the fact that the majority of economic indicators have surprised to the upside over the past month and a half—we are now looking for Q4 real GDP growth of 3.5%—it would seem likely that further upward revisions will be in store when the December employment data are reported for January this Friday. Consequently, our December employment forecast of +100k on nonfarm payrolls assumes that it will eventually be revised higher to better reflect an improving economic tone—evident in home sales, retail sales, core durable goods orders and the various purchasing managers’ surveys. Basically, the payroll number that is most consistent with the surrounding data may not avail itself for another month or so. Two, and more importantly, the US experienced serious inclement weather across much of the Great Plains and Midwest during the employment survey week, and we believe this may distort the payroll data to the downside. Moreover, inclement weather could also be impacting initial jobless claims, so we are hesitant to read too much into their latest drop. Recall that last week claims fell an unexpected 34k to 388k.
Note that initial jobless claims tend to decline from the beginning of December to the end of December. The average drop in not-seasonally adjusted terms has been 13% over the last two years. However, severe weather could keep eligible filers at home or cause the local area unemployment insurance office to close thereby exacerbating the tendency for claims to fall during the month. In the past, December has been the third ranking month in terms of inclement weather distorting employment. January is second, and February is first. This is gleaned from a series within the employment report that counts the number of workers who have a job but did not report to work because of inclement weather. We will be watching this “weather workers” series to see what, if any, distortion the weather had on the data. If payrolls print a consensus +140k along with our expectation of upward revisions and furthermore there is a weather effect, then a consensus number would be quite strong with respect to the economy.
We expect the unemployment rate to reverse the previous month’s 0.2% rise by declining from 9.8% to 9.6%. This is consistent with the fact that the insured rate of unemployment—the percentage of people eligible for receiving unemployment insurance—fell to a new cyclical low in December, down to 3.2% for the week ending December 11. This series is highly correlated with the unemployment rate and strongly suggests the rise in the latter was an aberration. —JL