NFP: Downside risk to the -200K estimate – TD Securities
|On Friday, the official US employment report is due. Market consensus points to an increase of 150K in payrolls. Recent data, like the ADP report, warns about a negative reading. Analysts from TD Securities estimate a decline of 200K in jobs in January.
Key Quotes:
“Payrolls likely plunged in January, but only because of temporary Omicron fallout; if anything, we see downside risk to our -200k estimate. Several Fed officials have already made clear that they will discount weak data as temporary. Also, we see upside risk on average hourly earnings, with an already strong trend likely to be added to by temporary Omicron effects relating to the composition of payrolls and the length of the workweek. Our 0.6% m/m estimate for hourly earnings implies 5.3% y/y, up from 4.7% y/y in December.”
“A weaker-than-expected NFP report would reinforce the recent USD selloff. It works through two channels: rates and risk. Risk sentiment would likely welcome easier financial conditions, especially if Omicron explains the growth weakness. That said, our dashboard shows the USD reaching oversold levels again so we use this recent pullback as a buying opportunity ahead of next month's Fed meeting.”
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