The US jobs report for January will offer further indications of how the global economy has fared into the new year.
Regarding what to expect, the market consensus appears to be coalescing around the 75K mark on the Bloomberg survey, which comes off the back of a -140k decline in December and sees the unemployment rate remaining at 6.7%.
That decline in nonfarm payrolls in December marked the first time that the US economy had shed jobs since the height of the first wave of the pandemic back in March and April 2020. It's worth noting that the number of people in work remains nearly 10m lower than its pre-pandemic peak back in February, so there's still a long way to go before we get back to normality in the labour market.
On the ADP employment heels, more than double consensus in Jan: 174k, with upward revisions. That will likely boost expectations for payrolls on Friday, which continued to keep US equities on an even keel throughout the New York session. I'm revising my forecast higher from 100k to 150k.
Still, I caution reading to much into the data. Although attention will increasingly turn to wages as the year progresses, the traditional average hourly earnings number will be an absolute mess. It’s not weighted or adjusted for wage levels, so has shot up in recent months – not because the labour market is strong, but because many low paid hospitality workers have dropped out of the sample.
But with the Fed’s dual messaging exceptionally dovish on interest rates – max employment and 2% inflation needed –regardless of what kind of positive number we get, the Fed will remain near zero, likely for as far as the eye can see. And even if economic data wobbled on the headline number, the Fed committed to keeping financial conditions comfortable for months to come.
Meanwhile, on the NFP look through trade, the vaccine narrative has such a long runway for catalyst evolution through the end of 2021 that, as consensus as it may already be, it’s difficult for prices to have fully reflected it all this far in advance.
Focus on where momentum is the strongest, whether it’s equities, USD, commodities or inflation.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower