Monday, January 28, 2019

Merrill on NFP

by Calculated Risk on 1/28/2019 12:59:00 PM

Here is Merrill Lynch economists forecast for the January non-farm payroll report:

We look for nonfarm payrolls to grow by 185k in January following a strong gain of 312k in December. We expect private payrolls, which excludes government workers to increase by 185k, implying no change in government payrolls in January.

Our private payrolls tracker based on internal BAC data is looking for somewhat stronger employment growth of 232k but we see a few reasons to fade the strength this month.
We also see some downside risk to private payroll employment growth due to the partial federal government shutdown. According to news reports, some government contractors have furloughed or laid off private workers while others employers have paused hiring activity during the shutdown. These disruptions may not be fully captured by our internal data as our data present a degree of selection bias, including but not limited to, income levels and geographies (Note that the BLS will count Federal Government workers that are currently furloughed as on payrolls since they will receive backpay).

Elsewhere, we estimate that the unemployment rate should be unchanged at 3.9% in January with a risk of it rising to 4% as furloughed workers will be counted as “unemployed on temporary layoff” in the household survey.
This mentions two key points: Government jobs on furlough will be counted in the establishment report since the workers will receive backpay, however those on furlough will be counted as unemployed (on temporary layoff) in the household report - so the unemployment rate might increase a little in January (perhaps to 4.1%).