In the most recent non-farm payrolls release, economists predicted an optimistic net gain of 10,000 jobs in January. But to the dismay of many, the forecast proved to be too upbeat as the actual results of the report showed that US firms laid off a net number of 20,000 people instead. To make matters worse, December’s non-farm employment change was revised down to -150,000 from -85,000. Where’s the spirit of Christmas in that?
The upcoming NFP report this Friday is expected to show that 40,000 more jobs were lost in February. This does not mean that the overall labor situation got worse though, as the tally was a little distorted by adverse winter conditions. During February, a lot of construction workers and retail shops were forced to shut down because of the wild blizzards, snowmageddons, snowpocalypses, snowicanes, and snowstorms the US experienced.
Nevertheless, let’s take a quick look at the recent jobs data from ADP to find out whether the grim forecast for February’s non-farm payrolls report is warranted. The ADP non-farm employment report showed that the private sector melted 20,000 jobs during the month as companies refrained from adding to the workforce until sustainable sales growth solidifies.
Meanwhile, the employment components of the ISM manufacturing and non-manufacturing surveys hinted at possible improvements in the labor market. Although the ISM manufacturing PMI dipped in February, its employment index warmed up to 56.1, its highest level in more than five years! Furthermore, the services PMI’s reading climbed to the 53.0 mark, its best score since December 2007! The increase was was fueled in part by the labor component’s rise from 44.6 to 48.6.
On one side of the popsicle, if the NFP report comes in better than expected, seeing as to how risk sentiment has been playing a crucial role, my guess is that currency traders might start unwinding those long dollar positions. Good data released from the US has caused risk appetite to rise, which in turn has boosted equity markets and non-dollar currencies. The best example of this would probably be the Aussie and the Loonie, which have managed to hold their ground against the dollar on the account of positive economic data.
On the other side of the popsicle, if it the NFP report comes in below expectations, risk aversion could surge and traders could end up skating back to the safety of the beloved dollar.
In any case, no matter what the outcome of the upcoming NFP report is, I think I’m going to hibernate in my gloom and doom igloo on this one and say that, although the country’s unemployment rate is projected to plateau at 10.0%, job growth is far from keeping up with job losses.
Remember, the Bureau of ‘Lying’ Statics only count those who are actively seeking work, and not those who got tired of looking for work and chose to drop out of the labor force. If they licked a frozen pole, you’d catch them confessing that the so-called underemployment rate, which includes both part-time workers and those who’ve given up looking, stands at a whopping 16.5%. How’s that for a strengthening labor market?