BarroMetrics Views: Non-Farm Payrolls March 2014
The consensus view of the Non-Farm payrolls provides an abject lesson of not adjusting a view in the light of new information.
Figure 1 shows the consensus and actual numbers since Dec 2013 – when the unusually cold weather impacted on the jobs number. We see:
- For the Dec (released in Jan) and Jan (released in Feb) consensus, there was little change. The actual numbers show an improvement from 74K to 113K.
- For Feb, the consensus number rate of change remained relatively constant around a 16% drop from Jan (The Jan consensus dropped 10%).
- The actual Jan to Dec numbers increased 52%.
- The ‘miss’ factor improved from a -63% in Dec to -37% in Jan.
The Mar number is promising to again be below consensus:
- The biggest ‘head up’ is Yellen’s comment that the weather may be affecting the job’s number. She also said a ‘poor’ Feb number will not affect ‘tapering’ (http://www.cnbc.com/id/101452201)
- The Feb ADP dropped from 155K to 139K
- The Feb ISM Non-Manufacturing dropped from 57.1 to 127K
So, what can we expect the number to be?
Forecasting Non-Farm Payrolls is not my area of expertise. And, it is unlikely that the improvement in the forecast will improve linearly. But, just for fun, let’s say it will….then…..
The Jan number improved by 41%. Given the improvement rate and the drop in consensus, the maximum NFP number would be 127K and the minimum would be 100K.
If the number comes in at these prices, it is unlikely to move the markets – the US$ and stock indices. A number of below 82K will probably weaken the US$. A number above 200K would probably strengthen the USD.
What about stocks? Difficult to say because:
- a strong number may raise the spectre of an increased rate of tapering (bearish), and a low number raise a possibility that tapering may slow (despite what Yellen said); OR
- a strong number may say the economy is A-OK (bullish), and a low number may say the economy is slowing (bearish).
For stocks, my strategy remains ‘long or out’.
FIGURE 1 Non-Farm