Goldman’s January NFP Preview

Goldman’s January NFP Preview

It was a busy week. The BoJ. The Fed. A blowout ADP report. The BoE. The Brexit white paper. Snapchat’s S-1. An Iranian missile launch. Plenty of Trump.

Lions. Tigers. Bears. Oh, my!

And what better way to wrap things up than the NFP report. The economic data print par excellence.

In a just a few short hours we’ll find out how many jobs the BLS wants you to think the US added last month and needless to say, the number has all kinds of implications for yields, the dollar, and yes, for stocks.

Below, find Goldman’s take on what to expect.

Via Goldman

We forecast that nonfarm payrolls rose 200k in January, following an increase of 156k in December, with reacceleration reflecting a combination of lower-than usual year-end layoffs, favorable weather effects, and further improvement in labor market indicators.

Factors arguing for a stronger report:

Weather rebound from December. Our analysis of NOAA (National Oceanic and Atmospheric Administration) weather station data suggests that unusually high snowfall during the December payroll survey period may have reduced job growth by roughly 20-40k. As shown in the left panel of Exhibit 1, snowfall in early January was much more in line with seasonal norms, suggesting scope for a weather-related rebound. Updating this analysis to incorporate regional granularity from the December state and local employment survey bolsters the case for January improvement, in our view. In addition to a 3k drop in the weather-sensitive construction category, the softness in overall December payrolls was particularly pronounced in the East North Central and Pacific regions, two parts of the country where snowfall was above seasonal norms during the week of December 17th. More specifically, in the right panel of Exhibit 1 we show that below-trend December payroll growth occurred in several states that also exhibited unusually high snowfall (in the weeks relevant for December payroll growth). Michigan, Illinois, Wisconsin, and Indiana stand out as four relatively large states where payrolls may have been depressed by weather in December.


Jobless claims and retail layoffs. Initial claims for unemployment insurance benefits moved lower, averaging a four-decade-low 248k during the four weeks between the December and January payroll survey periods. While seasonally adjustment difficulties likely account for much of the drop, we believe some of the decline reflects underlying labor market improvement and relatively fewer January retail layoffs — both of which would suggest scope for a rebound in January payrolls growth.

ADP. The payroll processing firm ADP reported a 246k rise in private payroll employment in January, up from +151k in December and well above expectations of +168k. In past research, we have found that large surprises in the ADP report tend to be predictive of the subsequent nonfarm payroll surprise. Additionally, we believe the above-trend growth in ADP construction employment (+25k) provides evidence for a rebound in weather-sensitive payrolls categories. n Manufacturing sector surveys. The employment components of manufacturing surveys generally improved in December, with most now in expansionary territory. The ISM manufacturing employment component rose to a 30-month high (+3.3pt to 56.1), and the Philly Fed (+9.2pt to +12.8), Dallas Fed (+9.5pt to +6.1), Richmond Fed (+9pt to +8), and Empire State (+10.5pt to -1.7) employment indices also improved. On the negative side, the Kansas City Fed (-2pt to +6) employment component softened, and the Chicago PMI employment index declined into contractionary territory. Manufacturing payroll employment rose 17k in December, its first increase in five months.

Service sector surveys. Most of the employment components of service sector surveys improved or remained at encouraging levels in January. The Philly Fed non-manufacturing employment index rose to a 1-year high (+2.8pt to +19.5) and the New York Fed index increased to an 18-month high (+4.5pt to +16.9, SA by GS). Meanwhile, the Richmond Fed (-4pt to +8.0) and Dallas Fed (-2.1pt to +4.8) measures pulled back modestly to levels still consistent with expansion. The ISM non-manufacturing survey will be released tomorrow, though the December employment index of 52.7 was consistent with moderate growth in servicesector jobs. Service sector payroll employment increased 132k in December and has increased 167k on average over the last six months.

Job availability. The Conference Board’s Help Wanted Online (HWOL) report showed an increase in online job postings for a second consecutive month in January, though their total job ad count remains 9.5% lower on a year-over-year basis (vs. -8.8% in December and -14.9% in November). We place a limited weight on this indicator at the moment in light of research by Fed economists, which suggests the HWOL ad count has been depressed by higher prices for online job ads

2 thoughts on “Goldman’s January NFP Preview

  1. Yeah funny enough the weather… Takes jobs from December and puts them in January, and January was nice enough it could have pulled in some of the spring jobs. A job pop and the Trumpluddites jump into the shark tank. At least that is what I am going with, if not it is going to be a sad weekend.

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