Is tomorrow’s NFP going to get RKO’d?
Posted by Eric Skates on
Is tomorrow’s NFP going to get RKO’d?
If you believe Trim Tabs, yes. You know I love their analytics and they’ve proven to be correct more often than not. We’ll see…
The U.S. labor market is weaker than the conventional wisdom believes. We estimate based on real-time income tax withholdings that the U.S. economy added between 55,000 to 85,000 jobs in February, down from 175,000 to 205,000 jobs in January. Last month’s growth was the lowest since July 2013.
We cite a range rather than a single figure for our February estimate because the timing of bonus payments impacts withholdings at this time of year and makes our year-over-year analysis more challenging than usual. Part of the sharp deceleration in wage and salary growth in February was likely due to shifts in bonus payments, but the deceleration was too sharp to be explained by bonus-related factors alone.
Our estimate is not an attempt to predict the initial estimate that the Bureau of Labor Statistics (BLS) will report on Friday. The BLS data is subject to so many seasonal adjustments and so much statistical manipulation that we have no way to know what the BLS will report.
If July 2013 rings a bell, that was the report that basically put rates back on course (FYI trim tabs predicted a similarly disappointing and shocking 23k jobs that month). Up until that point the markets were roiled over the so-called taper tantrum, cats and dogs were living together, it was mass hysteria. Perhaps a similarly poor report this time around will not only keep us #lowerforlonger, but even #lowerandlower. One thing to always keep in mind, this is a survey AND it’s accurate within 100k. Therefore anything can and usually does happen. 250k wouldn’t surprise me any more than 50k.
What does this mean? Well, we are right at a pivot. Stakes are pretty high. We could see us back at 1.60 or finally busting through 1.84. Be careful, but perhaps just slightly less than usually so. A few moons are aligning for this number to disappoint (also see jobless claims and today’s non-manu ISM employment index) and the support we’ve seen the last 24 hours at 1.84 indicates that we’re not alone in terms of those concerned about the economy. Heck, you have to go back 2 years to find such weakness in the services sector AND that’s what the optimists were hanging their hats on while they’ve been poo-pooing the weakness in manufacturing. It should be a fun morning.
Bulls and bears my friends.
Philip N. Mancuso, Chief Investment Officer
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