The median forecast of economists polled by Bloomberg is for tomorrow’s jobs report to reveal that 197,000 workers were hired to nonfarm payrolls in December.
The highest estimate is 250,000 — a forecast shared by Joe LaVorgna, chief U.S. economist at Deutsche Bank, and Ian Shepherdson, chief economist at Pantheon Macroeconomics.
LaVorgna and fellow Deutsche Bank economist Carl Riccadonna note “a broad improvement in the latest labour data … which led us to upgrade our December employment projections.”
In a note to clients, Riccadonna writes:
We now look for +250K on nonfarm payrolls and 6.8% on the unemployment rate. It is worth noting that in our employment scorecard, there was really only one component which materially weakened last month — Chicago PMI employment. We are dismissing the signals from both initial and continuing jobless claims, because both series displayed erratic behaviour throughout December. Aside from this, December was a pretty solid month for employment indicators.
While much of the market focus on today’s report will be on payrolls and the unemployment rate, there are a few other components of the report we will be monitoring. As always during the winter months, we will pay close attention to workers who could not work or worked reduced hours due to inclement weather. We do not anticipate a significant weather distortion in December, based on utility statistics, but if the payroll print is unusual this series could provide clues. Another underlying detail worth noting is the diffusion of job gains, because job creation occurring across a wide range of sectors generally suggests that the pace of hiring is more resilient. In November the employment diffusion index rose to an 11-month high of 63.5%. Lastly, the aggregate income tally from the employment report, which tells us about consumers’ proclivity to spend in the near term, sometimes diverges from the tone of the payroll change — so it is important to evaluate the payroll change in the context of average hourly earnings and hours worked, as well.
Following the release of ADP’s stronger-than-expected monthly National Employment Report on Wednesday, Pantheon’s Shepherdson says “the odds now favour a consensus-beating report on Friday.”
In a note to clients, he writes:
The ADP employment report shows private payrolls rose 238K in December, above the 200K consensus and the revised 229K in November. This is the strongest ADP number since November 2012, and it means we need to revise up our estimate for Friday’s official report.
ADP is by far the best single advance indicator of the official number. Since the report was reconfigured in October 2012, the median absolute difference between the initial ADP number and the initial official estimate has been only 40K, which is remarkable given that the official data are only accurate to within about +/-90K. With friendly seasonals likely to support the official numbers too, we now look for 250K on Friday, up from our previous estimate of 225K. ADP has clearly strengthened in recent months after a softer spring/summer; we look for further H1 gains.
The December jobs report is released on Friday morning at 8:30 AM ET. Follow the data LIVE on Business Insider »
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