What To Expect From NFP? - Views From 15 Major Banks

The following are the expectations for today's US February jobs report as provided by the economists at 15 major banks along with some strategies to play the USD into the event as provided by the FX strategists at these banks.

Goldman: Change in Nonfarm Payrolls (Feb): 220K | Unemployment Rate (Feb): 5.60%| Average Hourly Earnings YoY (Feb): 0.20%.

SEB: Change in Nonfarm Payrolls (Feb): 210K | Unemployment Rate (Feb): 5.60%.

Morgan Stanley: Change in Nonfarm Payrolls (Feb): 250K | Unemployment Rate (Feb): 5.60%... A strong US labour market report has the potential to push the US yield curve higher, putting EM under further selling pressure. Should the labour market report disappoint, the damage should be limited and not go beyond three trading days as investors will digest the impact of the recent cold weather and West Coast harbour disruptions. Hence, we would consider buying the USD should there be a labour market-related setback.

RBS: RBS Economics is looking for a more trend-like 260K rise. The market and RBS are looking for unemployment to reverse its tick up in Jan and return to the Dec cyclical low of 5.6%. The market is centred on a 2.2% y/y rise in average hourly earnings, sticking to this level after it rebounded in Jan from a surprisingly weak Dec outcome. RBS sees it slipping a bit to 2.1%y/y...Funds that have shifted into the USD recently are looking for a home from weaker trends and negative developments in other currencies. As such, we see upside risk for the USD heading into payrolls. These funds are unlikely to flea on a weaker than expected US payrolls report. On the other hand, a decent US payrolls report may drag more speculative flows into the USD and push it higher.

Credit Suisse: We expect a cool-down in February payrolls following the recent torrid stretch of increases. Our 220K forecast is below the 3m average of 336K, and the 12m average of 267K, and is lower than the current 235k consensus. Still, payrolls growth in the low-200K zone is probably “good enough” to keep the Fed on track for a mid-2015 lift-off, provided the inflation outlook does not deteriorate further. We expect the unemployment rate to back down to 5.6%, and we project February earnings at 0.2% (both in line with consensus). Our official call for today’s payrolls release is not at the high end of the estimate spectrum, but we think it is consistent with a strong response by the USD.

Danske: Focus will be on the US employment report and we look for job growth of 235,000 in February in line with consensus. This is a slower pace than in the past six months but still solid. We expect the unemployment rate to tick down one notch to 5.6%. The details of the report will be important to watch – in particular, average hourly earnings, which rebounded in January. A further acceleration in hourly earnings suggests that wage inflation is picking up. For some FOMC members, this is an important signal ahead of a rate increase, although we expect the most important members of the committee to be less focused on wage inflation when judging the right time for lift-off.

Deutsche Bank: DB thinks that the February nonfarm payrolls may have dodged the worst of the recent weather disruptions given the plunge in jobless claims during the February employment survey week and the current (steadily higher) trend in withheld income tax receipts. DB sees NFP at +250k and Unemployment rate at 5.5%.

ANZ: We forecast a rise of +210k, which is below market and well below the three month (+330k) and six month (+277k) average rate of payroll growth. Slower hiring seems consistent with the softer recent tone of US domestic data, particularly in manufacturing and the oil and gas sectors. However, strength in other indicators like the JOLTs survey is suggestive of upside risks. We expect the unemployment rate to ease to 5.6%, just above the Fed’s 5.2-5.5% ‘central tendency’ estimate. For markets, the focus will be on average hourly earnings (AHE). Although AHE rebounded in January, earnings have been stagnant around 2% y/y for an extended period. We’d caution that AHE is distorted by compositional factors, particularly early and late in the cycle. Thus it can be a poor guide to inflation and we prefer to focus on the ECI wage measure. However, as full employment draws closer the AHE should gradually lift.

Nomura: After a strong January report, we expect a somewhat weaker but still solid pace of growth at 230K for February (Unemployment Rate 5.6%).

BTMU: Today’s non-farm payrolls data should confirm a still healthy jobs market with only a moderate slowdown from the 257k gain recorded in January. However, 1mn jobs have been created in the last three months and more subdued growth could be evident today. The cold weather snap and the west coast port strike, which was mentioned in the ISM report, may also undermine the jobs number. Still, the estimates of spare capacity in the labour market that we monitor continue to point to wage pressures building and the annual average wage growth picking up further over the coming months. If we get a sub-200k NFP figure today but the wage data continues to accelerate that to us would be the far more important element of the report in terms of shaping the monetary policy outlook. A favourable report should result in a greater reaction in short-term rates in the US given the importance of today’s report in shaping Fed thinking over the near-term. The dollar is likely to remain well supported.

BNP Paribas: We expect a 250k increase in payrolls at today’s report and forecast the unemployment rate to fall to a new cycle low of 5.5%. Average earnings, meanwhile, is likely to return to a trend-like 0.2% m/m pace. The erosion in economic slack should add to the Fed’s confidence that core inflation will turn around during the summer, while the rise in inflation breakevens should also give policymakers some comfort that inflation expectations will not restrain their tightening plans.

Citi: The 200K call hinges on the interplay between weather and seasonal factors. Some of the recent outsized job gains, averaging 336K per month since November, probably reflected favourable weather. But weather conditions worsened right after the January survey week, suggesting a potential reversal in the tone of the next employment report.

Barclays: We expect today's February nonfarm payrolls to increase 250k, private payrolls to rise 245k, and government payrolls to expand 5k. Our forecast for 245k in private payroll growth in February would represent a slowing from the 320k and 267k rates of growth in December and January, respectively. Elsewhere in the February employment report, we look for the unemployment rate to fall 0.1pp, to 5.6%, and average hourly earnings to rise 0.2% m/m and 2.1% y/y. Finally, we expect the average workweek to hold steady at 34.6.

BofA Merrill: We are looking for job growth of 250,000 in February, a slight slowdown from the exceptional monthly rate of 336,000 over the prior three months. Given the sharp gain recently, we think the risk is that the February jobs report disappoints. The revisions will also be of interest after the dramatic upward revisions in the last report. Looking at the components, we expect job growth to slow in the manufacturing sector given the weakening in the surveys. We also look for another decline in the mining sector as the weakness in oil investment slowly shows through in the data. There is also a risk that hiring in the retail sector slows after the strong gain in January and the sluggish pace of sales. The unemployment rate is likely to fall to 5.6% as the household survey also shows a solid pace of job growth. After the notable increase in the labor force participation rate in January, we expect little change in February. However, there is a great deal of uncertainty about the monthly fluctuations of the labor force. Perhaps the most important number in the report will be average hourly earnings, which we think will increase 0.3% mom, showing a solid increase after the 0.5% gain in January. However, it will simply keep the yoy rate at 2.2%. Looking ahead, if average hourly earnings increase a steady 0.25% mom, wages will reach 2.5% by 2Q and 3.0% by 4Q. Even moderate wage growth will be sufficient to adjust the trend higher, provided it proves consistent.

Credit Agricole: At 245k (cons. 235k, prev. 257k) our economists anticipate a better-than-expected payrolls reading. At the same time they expect the unemployment rate to drop to 5.6% from 5.7% previously. Under such conditions the Fed is likely to continue considering higher rates as soon as the middle of this year. However, it must be considered too that wage price developments will attract a lot of attention. Nevertheless, improving domestic conditions should be reflected in further rising wage price developments. As such, we remain of the view that the USD faces additional upside risk. Even in the event of a weaker-than-expected employment report we favour buying USD dips. This is mainly due to the notion that the trend of improving growth conditions will still remain intact.

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