The February nonfarm payroll number is expected to rise 180k after a 304k January surge. A decline in the jobless rate is anticipated alongside gains in hours-worked and hourly earnings. The February estimate is below the 223k monthly average jobs gain in 2018, based on downside risks from weather, some unwind of robust December and January payroll gains, high claims, and weakness in the employment gauges of the various producer sentiment surveys, though the consumer and producer surveys have stabilized at still-firm levels after year-end pull-backs.
The vehicle sector should boost employment, as the assembly rate has partly reversed the big January drop, though vehicle sales remained soft in February.
Nevertheless, Wednesday’s ADP number which reported private payrolls increased 183k in February, below the 189K forecast and added to the expectations that today’s Non-Farm payroll will be below 200K. This correlation between the ADP and NFP is based on the new methodology used by the the ADP Research Institute.
When the management of the ADP data release process was transferred to Moody’s from Macro Advisers back in 2012, the methodology changed. The changes by Moody’s exacerbated the 2008 adjustments that included the incorporation of a variety of data sources beyond ADP such as past BLS industry-level figures and initial claims, making the reported ADP figures more of an econometric “best guess” of Friday’s payroll figure rather than a reflection of what the ADP source-data suggest. Moody’s adjustments include source-data from industrial production, personal income, business sales, and GDP.
Overall, the outlook for job growth remains strong and payroll gains are forecast to average 206k in 2019.
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Andria Pichidi
Market Analyst
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