NFP Preview: what to expect from February’s job report

After a strong January’s job report which was published on 3rd Feb. 2017 where NFP increase by 227K and Average Hourly Earnings increased by 0.1% and unemployment rate also ticked higher to 4.8%. Both, Average Hourly Earnings were lower than expected i.e 0.3% and the unemployment rate was higher than expectations i.e 4.7%.

So it was a mix report with more hiring and other two components were lagging behind.

A large fold increase in NFP was due to the holiday season in the US in late December to mid-January, where most of the hiring was composed of Part-time workers. Retail, construction and construction- related sector, real estate, leisure were hospitality sector were the main contributor to this report.

So what we can expect from February report which is due on 10th March, Friday.

In general expectations from various economists are as follows

NFP                                                185K

Average Hourly Earnings           0.3%

Unemployment Rate                  4.7%

But in our opinion, this should be a very bad report where

NFP                                                125K-140K

Average Hourly Earnings           0.0% or may be in negative territory

Unemployment Rate                  4.8%

The main reasons for these kinds of predictions are

  1. February is the shortest month of the year, short and simple.
  2. Federal hiring has been stopped since 1st And it should cause at least 5K to 10K jobs draw down from the previous report.
  3. The Holiday season is over so further part-timing jobs will be lower than the previous report.
  4. New home sales and new building permits data show that construction and real estate sector’s activity is slowed down.
  5. Leisure and hospitality sector also seeing weaker demand in February which was very high in Jan because of NEW YEAR holidays.
  6. The Dollar value was also higher in February than January which will cause a drop in earnings.
  7. Employers are also still unsure of Mr. Trump’s economic plans which will also affect further hiring.

 

So how this job report will impact Dollar

These report should drag dollar lower as Yellen hinted a hike if economic data fall in place. And this report will reduce FED’s hike chances for some time.

But if you look closely to what Yellen said that any NFP, in 75K-150K range, is good for the economy but if Wages also come below than expected then we can have a very strong downward reaction in Dollar against all the other Major currencies.

But after a strong downward reaction dollar may find the new fresh bid and it may recover some of its losses before FOMC rate decision which is due on 15th March 2017.

As if FED want to hike, this is their best chance other Fed will lose all its credibility and dollar will plunge to new lows in near term future.

Let’s wait and see how things turn out.

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  • Today ADP data show 298K increase in NFP..i think they missed many points

  • Adif Khan

    useful analysis

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