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MNI 5 THINGS: US January Payrolls Seen +167k; Downside Risk

     WASHINGTON (MNI) - The median forecast in an MNI survey shows analysts
expect January nonfarm payrolls to rise by 167,000 when they are released on
Friday, a much more modest gain than the 312,000 surge in December, with a
slight risk of an overestimate. The US government shutdown is not expected to
have a strong impact on the headline number.
     Analysts also expect average hourly earnings to rise 0.2%, the average
workweek to remain at 34.5, and the unemployment rate to hold steady at 3.9%,
though with a slight upside risk, as furloughed workers will be classified as
unemployed on temporary layoff. This month's report will also contain annual
benchmark revisions, which are expected to be small but positive on net.
     Ahead of the release on Friday, we outline five themes for particular
     When estimating payrolls in the month of January, analysts have a tendency
to overestimate, having done so 12 out of the last 20 years by an average of
56,833. In contrast, their eight underestimates average 87,750 and include the
most recent two years. Given that a repeat of last month's surge in headline
payrolls is unlikely, there is a greater chance of analysts overestimating than
underestimating this month. A look at the past ten years shows analysts leaning
toward overestimates as well, with six misses to the high side that average
52,167. Based on analysts' history, there is a slight downside risk to this
month's estimate of 167,000.
     January's whisper number of 191,000 indicates that markets are expecting
payrolls to post a much larger gain than analysts. Considering last month's
large upside surprise and expectations for net positive annual revisions as well
as minimal government shutdown effects, markets seem to be optimistic that
payrolls will see another strong month. In the last year, both markets and
analysts have overestimated payrolls five times, by an average of 59,400 and
47,000 respectively, and underestimated seven times, by an average of 57,286 and
51,857 respectively. With so many factors that can potentially affect payrolls
this month, it is uncertain if markets or analysts, or both, will be surprised.
     As with their expectations for headline payrolls, markets are anticipating
a larger rise in average hourly earnings than analysts. Market expectations are
for a 0.5% rise in earnings, while analysts' consensus is for a smaller 0.2%
rise. In the last year, both have been on target four times, underestimated five
times, and overestimated three times. When analysts overestimate, it is by
0.10pp compared to 0.13pp for markets. And when they underestimate, it is by
0.12 and 0.14pp respectively. With no clear directionality to their misses in
the last year, a potential miss this month could go in either direction.
     The ADP Research Institute January Employment Report, released Wednesday
ahead of the payrolls release, showed an employment gain of 231,000 among ADP
client companies in January. This figure generally supports the analyst
consensus for a solid gain in January nonfarm payrolls. However, it should be
noted that the ADP figure and the BLS figure often miss each other by a wide
margin, so caution is urged when trying to make a direct linkage.
     Despite the furlough of 800,000 federal government workers during the
January 2019 employment survey week, some of which were forced back to work
without pay, the impact of the partial US government shutdown is expected to be
minimal. Because the affected workers will be receiving back pay, they will be
counted as employed in the establishment survey. However, the government workers
that were not called in and those contractors that were not reassigned to other
projects WILL be counted as unemployed on temporary layoff in the household
survey. Though the unemployment rate is not expected to change from 3.9%, this
does pose some upside risk. Ultimately, the largest impact is expected to come
from contractors working for the federal government rather than government
employees. For more details on how the shutdown will affect BLS data releases,
see the links below:
--MNI Washington Bureau; +1 202-371-2121; email:
--MNI Washington Bureau; +1 (973) 494-2611; email:
--MNI Washington Bureau; tel: +1 202-371-2121; email:

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