Wednesday, March 04, 2015

Preview for February Employment Report

by Bill McBride on 3/04/2015 03:28:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for February. The consensus, according to Bloomberg, is for an increase of 230,000 non-farm payroll jobs in February (with a range of estimates between 200,000 and 252,000), and for the unemployment rate to decline to 5.6%.

The BLS reported 257,000 jobs added in January.

Here is a summary of recent data:

• The ADP employment report showed an increase of 212,000 private sector payroll jobs in February. This was below expectations of 220,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth slightly below expectations.

• The ISM manufacturing employment index decreased in February to 51.4%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs declined by 10,000 in February. The ADP report indicated a 3,000 increase for manufacturing jobs in February.

The ISM non-manufacturing employment index decreased in January to 56.4%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 245,000 in February.

Combined, the ISM indexes suggests employment gains of 235,000.  This suggests growth close to expectations.

Initial weekly unemployment claims averaged close to 295,000 in January, down from 298,000 in January. For the BLS reference week (includes the 12th of the month), initial claims were at 282,000; this was down from 308,000 during the reference week in January.

Generally this suggests slightly fewer layoffs, seasonally adjusted, in February compared to January.

• The final February University of Michigan consumer sentiment index decreased to 95.4 from the January reading of 98.1.  Sentiment is frequently coincident with changes in the labor market, but this decrease is probably mostly due to an increase in gasoline prices in February.

• Trim Tabs reported that the U.S. economy added between 215,000 and 245,000 jobs in February. This was up from their 190,000 to 220,000 range last month. "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 141 million U.S. workers subject to withholding".

• Conclusion: There is always some randomness to the employment report, but most indicators suggest an employment number close to the consensus.

Note: Last February, the economy added 188,000 jobs according to the BLS, so anything above 188,000 (including revisions) will increase the year-over-year change (already highest since the '90s).