Thursday, January 09, 2014

Employment Report: Some Positive Outlooks

by Calculated Risk on 1/09/2014 03:54:00 PM

Yesterday I posted an employment preview. Even though the ISM indexes suggest around 245,000 payroll jobs added in December, and the ADP employment report was above expectations at 238,000 private sector jobs added - I still took the "under" (under the consensus forecast of 200,000). My key reason for a little pessimism was that unemployment claims spiked higher during the BLS reference week, possibly due to weather factors.

Here are a couple more positive outlooks:

From Tim Duy at Economist's View: Next Up: Employment Report

Since it worked well last time, my quick-and-dirty estimate is a 245k gain for nonfarm payrolls in December ... Use with caution, usual caveats apply. Forecasting the preliminary nonfarm payroll gain is akin to throwing darts. And my prior is that something that worked well last month probably will not work well this month. That said, while this technique might not predict the exact number, I think it tells us that:

   1. The labor market is improving modestly.
   2. Any large deviation from a gain of 245k - either positive or negative - is likely not indicative of the underlying trend in labor markets.

For comparison, this is a decidedly above consensus forecast. Consensus is for 200k with a range of 120k to 225k. 245k would be a large upward surprise.
From Kris Dawsey at Goldman Sachs (revised up from 175,000):
We forecast a gain of 200,000 nonfarm payroll jobs in December. Factors arguing for a solid print include the recent trend, an improvement in most employment indicators already released for the month, the compressed holiday hiring period, and a potential "couriers and messengers effect." On the negative side, cold weather is a downside risk.
From Deutsche Bank economist Carl Riccadonna (via Business Insider):
We now look for +250K on nonfarm payrolls and 6.8% on the unemployment rate. It is worth noting that in our employment scorecard, there was really only one component which materially weakened last month — Chicago PMI employment. We are dismissing the signals from both initial and continuing jobless claims, because both series displayed erratic behavior throughout December. ...

As always during the winter months, we will pay close attention to workers who could not work or worked reduced hours due to inclement weather. We do not anticipate a significant weather distortion in December, based on utility statistics, but if the payroll print is unusual this series could provide clues.
Overall the trend is positive, but it is difficult to predict any one month.