With the “synchronous global slowdown” narrative now confirmed and adopted as consensus, the US economy stands as the last bastion of hope for those hanging their hats on the idea that the world will avoid falling into a deep downturn.
Thursday’s ECB proceedings betrayed the extent to which dovish turns by policymakers are only “good” news if they aren’t predicated on overtly dour growth projections, and the Governing Council’s cut to the euro-area’s 2019 growth outlook certainly has a claim on “overtly dour.”
Speaking of dour forecasts, this week also brought us a pessimistic update from the OECD which again cut its outlook for the global economy, citing, among other things, Europe on the brink of recession, simmering trade tensions and China’s ongoing deceleration.
With that as the disconcerting backdrop, all eyes turn to the February jobs report in the US as the last hurdle for a week that has been anything but inspiring for US equities.
The US labor market is riding a record 100-month streak of gains and generally speaking, analysts were looking for “more cowbell” after January’s blockbuster.
“We forecast nonfarm payroll employment growth of 210k in February following an outsized gain of 304k in January”, BofAML wrote, in their preview. Barclays was looking for 200k on the headline, near the post-crisis average.
For their part, Goldman was less optimistic. “We estimate nonfarm payrolls increased 150k in February, 30k below consensus and the slowest pace in five months”, the bank wrote on Thursday, adding that if you ask them, “the trend in job growth has likely slowed from the 232k average pace of the last six months, and we also expect a drag of at least 40k from above-average snowfall during the February survey week.”
Well, suffice to say the party looks like it might be over, because it is a miss – and “bigly.” The headline print is just 20k, missing the lowest estimate (85k) by a country mile and making a fool of consensus.
This is the worst reading since September of 2017.
Worse (depending on your penchant for thinking that the Fed might be inclined to rethink the pause on hotter-than-expected inflation), AHE came in hot at 0.4% MoM and 3.4% YoY, with that latter print being well ahead of estimates.
Manufacturing payrolls managed just a 4k gain, well below the 12k expected.
Now let’s see what Larry Kudlow, Kevin Hassett and the other administration cheerleaders have to say about this apparent “glitch.”
Estimates and Priors
- Change in Nonfarm Payrolls, est. 180,000, prior 304,000
- Change in Private Payrolls, est. 170,000, prior 296,000
- Change in Manufact. Payrolls, est. 11,500, prior 13,000
- Unemployment Rate, est. 3.9%, prior 4.0%
- Average Hourly Earnings MoM, est. 0.3%, prior 0.1%
- Average Hourly Earnings YoY, est. 3.3%, prior 3.2%
- Average Weekly Hours All Employees, est. 34.5, prior 34.5
- Labor Force Participation Rate, est. 63.2%, prior 63.2%
- Underemployment Rate, prior 8.1%
- U.S. Feb. Nonfarm Payrolls Rose 20k
- Nonfarm payrolls in Jan. rose 311k
- Participation rate 63.2% vs prior 63.2%
- Avg. hourly earnings 0.4% m/m, est. 0.3%, prior 0.1%
- Y/y 3.4%, prior 3.1% est. 3.3%
- Nonfarm private payrolls rose 25k vs prior 308k; est. 170k, range 134k-245k from 31 economists surveyed
- Manufacturing payrolls rose 4k after rising 21k in the prior month; economists estimated 12k, range 8k to 24k from 18 economists surveyed
- Unemployment rate 3.8% vs prior 4.0%; est. 3.9%, range 3.7%-4.1% from 73 economists surveyed
- Underemployment rate 7.3% vs prior 8.1%
- Change in household employment 255k vs prior -251k