US NFP Preview: 9 Major Banks expectations from January payrolls report

Today, we have an all-important US nonfarm payrolls report due for the month of January, and as we get closer to the release time, here are the expectations as forecasted by the economists and researchers of 9 major banks, regarding the upcoming employment data.

Most of the economists and researchers are expecting January US NFP to post a soft reading in between 100K to 174K, after a very strong 312k nonfarm payrolls print of Dec. In addition, they are forecasting the US unemployment rate to slide back to anywhere in between 3.8-4.0% range.

TD Securities

“We expects payrolls to mean-revert to 150k in January following the eye-popping jump to 312k in December. In effect, we expect some of last month's unexpected gains in employment to be given back in January.”

“Conversely, an additional weaker employment signal may also be exhibited in the household survey as a consequence of furloughed federal employees due to the ongoing government shutdown. Indeed, we anticipate the unemployment rate to reflect this by a tick up to 4.0% in January, though we see further risks to the upside. Lastly, we expect wages to keep their momentum and rise 0.3% m/m, maintaining the annual print unchanged at 3.2% in January.”

NBF

“We expect underwhelming numbers (+100K) even though jobless claims continued to hover near record lows in the month. That is partly due to the government shutdown, but also to the sheer strength of the previous report (+310K), which suggests a giveback is likely this time.”

“The unemployment rate, for its part, may slide one tick to 3.8% if, as we believe, the household survey shows moderate employment gains.”

ING

“In general, we expect 2019 to see slower payrolls growth than we did in 2018. There are more headwinds facing the US economy, such as the fading support from the fiscal stimulus, lagged effects of higher interest rates and the strong dollar plus ongoing fears about trade protectionism at a time of weaker external demand. This is likely to mean that hiring will probably slow.”

“Arguably a bigger constraint in the near term is the lack of available workers to employ. The National Federation of Independent Businesses reports that 39% of US small businesses have vacancies that they cannot fill – an all-time high for a survey that has been running for over 40 years. Unemployment is at a 49-year low with the latest Federal Reserve Beige Book noting that labour markets were “tight” in all districts of the US and that “firms were struggling to find workers at any skill level”. Taking it all together, we forecast payrolls growth of 140,000 versus the consensus economist survey of 165,000 which ranges from +230,000 all the way down to -40,000.”

“We forecast a 0.3% month-on-month gain in wages, in line with consensus, which would keep the annual rate of pay at 3.2%. The unemployment rate was the one disappointing piece of news in last month’s jobs report. It rose from 3.7% (the lowest level since December 1969) to 3.9% last month on rising participation in the workforce, but this data tends to be choppy and we expect to see a partial reversal back to 3.8%.”

Westpac

“The very, very strong 312k nonfarm payrolls print of Dec (with an additional 58k in back revisions to the prior two months) was largely ignored by financial markets. This occurred because, around the same time, the ISM's disappointed and, more importantly, Fed Chair Powell put forward a more cautious view of the outlook.”

“There is no reason to disregard the strength of this data print. Though being 100k over the month average of 2018, there is however reason to expect some payback in Jan. We consequently look for a 150k gain in the month.”

“There has been considerable uncertainty over the impact of the shutdown on these numbers. It won't affect the payrolls count, but it is likely to add to unemployment owing to temporary layoffs.”

CIBC

“A 174K gain in jobs would normally be enough to put downward pressure on the unemployment rate, but since that measure is derived from a separate survey, it is likely that the unemployment rate ticked up to 4.0% temporarily as furloughed workers were classified as unemployed in that survey. A 0.2% gain in wages would leave annual wage growth at above 3%.”

“Despite January’s figures displaying the temporary impacts of the government shutdown, underlying momentum suggests that the US economy has room for continued, healthy employment gains in the months ahead, with the prime-age employment-to-population ratio still below its prerecession levels.”

Danske Bank

“We think average hourly earnings have risen +0.25% m/m in January, which means a fall in the annual growth rate from 3.2% to 3.1% y/y.”

“We expect the unemployment rate to come in higher due to the shutdown, as we believe the household survey from which the unemployment rate is derived is likely to consider the furloughed workers as unemployed.”

“For total payrolls, furloughed workers are counted as employed; however, due to the shutdown there might also be some noise in the total payroll number. We will keep an eye on private payrolls, which are unaffected.”

Goldman Sachs

“Weather likely contributed to last month's blockbuster report, January was also relatively warm and dry during the reference week.”

“Estimate the unemployment rate increased one tenth to 4.0% in January … mostly reflecting the furlough of nearly 400k federal workers that the BLS plans to classify as "unemployed on temporary layoff”.”

“Expect average hourly earnings will increase 0.2% month-over-month and 3.1% year-over-year.” 

Barclays

“Nonfarm payrolls to have increased 160k in January … following some payback from December strength.”

“In the Household Survey, however, furloughed workers will be categorized as 'unemployed on temporary layoff', and therefore, we expect the unemployment rate to rise by a tenth, to 4.0%.” 

“We look for average hourly earnings to rise 0.3% m/m (3.2% y/y).”

“Expect average weekly hours to remain unchanged at 34.5.”

Nordea Markets

“The monthly US job report has “government shutdown” written all over it on Friday, as data on everything from the size of the labour force to wages could be distorted by the shutdown. Furloughed public workers will though not count as unemployed in the NFP, but the indirect effects on private contractors (working for the public sector) may be substantial. However, we still keep an eye on the unemployment rate, as some of our more bearish indicators have started to hint at an upcoming trough in the unemployment rate relatively soon. Our main view that the labour market tightness will drive wage growth even higher (than expected) remains intact.”