KITANO: My Colleagues Here At JPMorgan Are Way Too Bullish About Tomorrow's Jobs Report

Pole vault fail

Photo: flickr / iamadonut

JPMorgan’s Japanese Equity Strategist Hajime Kitano writes pretty often about U.S. economic statistics.His latest dive into the numbers brings him to an interesting conclusion: his fellow economists at JPMorgan, who are responsible for determining the bank’s “house view,” may be substantially overestimating tomorrow’s nonfarm payrolls numbers.

Here is Kitano’s own preview of tomorrow’s jobs report in his latest note to clients:

The J.P. Morgan economics team estimates November non-farm payrolls to come in at +100,000. This could be too high, in my personal view. First, the manufacturing employment index has fallen below 50 for the first time since September 2009 at 48.4. The nonmanufacturing employment index was also announced last night, and at 50.3 it just stayed above the important 50 level but recorded its largest drop since March 2009 of 4.6pts mum.

Figures 1 and 2 show the relationship between these two indices and the number of employed people in manufacturing and services. Based on this relational expression, I estimate that November manufacturing payroll will fall by 44,600 people while services payroll rises by 67,800. The total of these two figures is a net gain of 23,200, which is less than the consensus forecast for private-sector employment change (+90,000).

Here are Kitano’s regressions he used to come up with these figures:

Kitano jobs regression

Photo: JPMorgan

Kitano jobs regression

Photo: JPMorgan

We’ll have to wait until tomorrow at 8:30 AM ET to see who has the closer estimate. Follow the release LIVE on Money Game >

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