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PREVIEW: 5-Year Supply Due

     WASHINGTON (MNI) - The median forecast in an MNI survey shows analysts
expect February nonfarm payrolls to rise by 183,000 when they are released on
Friday, a much more modest gain than the 304,000 surge in January, with a strong
risk of an underestimate. 
     Analysts in the MNI survey also expect average hourly earnings to rise
0.3%, the average workweek to remain at 34.5 hours, and the unemployment rate to
fall back to 3.9%. The Bloomberg consensus is also calling for a 183,000 rise in
payrolls and a 0.3% rise in earnings.
     Ahead of the release on Friday, we outline five themes for particular
     In the last ten years, analysts have shown a clear tendency to
underestimate payrolls in the month of February, having done so eight out of the
last ten years, including each of the last seven years. On average analysts
underestimate by 45,875 in February. Considering some of their largest misses,
including a 103,000 underestimate in February 2017, have been in February, a
large upside surprise could be in the cards.
     February's whisper number of 174,000 suggests that markets are expecting
more of a slowdown in payrolls growth than analysts. However, both markets and
analysts have shown a tendency to underestimate headline payrolls in the last
year, having done so seven times each by similar amounts, 72,000 and 69,286
respectively. Based on the upside surprises to payrolls in the last two months,
indications of an upward revision to January's private payrolls from Wednesday's
ADP report, and their respective estimates the last year, payrolls may post a
gain larger than both market and analyst expectations.
     As with payrolls, markets are also expecting a smaller gain in average
hourly earnings than analysts. While analysts are expecting a 0.3% rise in
earnings, markets are expecting a slightly softer 0.2% gain. In the last year,
both markets and analysts had a relatively even split between overestimating and
underestimating earnings, so the direction of a potential miss this month is
     Although there is little difference in their average underestimates, market
misses to the high side have been slightly higher than analysts'. Their
respective overestimates average 0.20pp and 0.10pp, and excluding a large
overestimate last month, market overestimates average 0.13pp. This month, a miss
would likely be relatively small and could go in either direction.
     Year over year earnings growth is expected to have accelerated in February.
In order for the year/year rate to rise to 3.3%, average hourly earnings would
have to rise by at least 0.264% this month. Since earnings rose just 0.1%
month/month in February 2018, if earnings rise by 0.3% as expected by analysts,
the year/year rate would rise from 3.2% to 3.3%.
     The ADP National Employment Report reported a 183,000 gain in non-farm
payrolls in February, with a sizeable upward revision to the January number from
213,000 to 300,000. As a result, there is less of a chance of a downward
revision to the January BLS number, and lends weight to the analyst forecast for
a moderate jobs gain for February.
     However, the ISM Manufacturing and Non-Manufacturing Employment indices
showed a deceleration in hiring growth in both sectors in February.
Additionally, the Challenger Layoff Intentions Report for February showed layoff
intentions rising to a three-year high. 
     Although the Challenger report only records layoff intentions rather than
actual layoffs, it is likely that some of the announced layoffs did take place
during February. Combined with ADP's track record of consistently missing the
BLS number, these releases suggest an element of downside risk.
--MNI Washington Bureau; tel: +1 202-371-2121; email: