Deutsche Bank’s Joe LaVorgna is one of the biggest bulls on Wall Street, and up until today he had been calling for 300K Non-Farm Payrolls gained in March.
But he’s just lowered his number.
The basic reason?
The momentum in initial jobless claims has collapsed.
(Thursday’s) data were noteworthy in that they implied less employment growth and possibly less GDP growth in the current quarter than what we have been projecting. Initial jobless claims for the week of March 24 fell -5k to 359k after the prior week was revised up a sizeable +16k to 364k. In fact, the past two months of claims’ readings were revised higher as well, reflecting annual revisions to claims which date back to 2007. The new claims figures show that claims were flat between the February and March survey periods at 369k on the four-week moving average. The four-week moving average during the March survey week had originally been reported at 355k.
These revisions are important to the near-term employment outlook because we use both the direction and level of claims to estimate nonfarm payrolls. Normally, we wait until we see the results of the monthly ADP survey, released two days prior to the employment report, before considering revising our payroll forecast. But, the ADP survey uses the claims data in its estimate of employment, as well. Consequently, we believe it is more prudent to make a forecast now than to wait until next week.
So what are claims now saying? While the downtrend from last September is still firmly intact, the higher outright level points to a lower payroll gain than the preliminary +300k that we had been forecasting. We believe a gain similar to the average seen in January and February (+256K) is more likely. Hence, we are trimming our March nonfarm payroll forecast by 50k to +250k, and we lowered our private payrolls forecast by 50k to +250k, too. We continue to look for the unemployment rate to edge down one-tenth to 8.2%, because the insured rate of unemployment—the ratio of people receiving unemployment insurance that are eligible—fell one-tenth to 2.6%, a cyclical low.
On this matter of initial claims momentum being revised, this chart from Nomura shows nicely how the whole trend has been revised upward as of today.