Article / 04 September 2014 at 9:50 GMT

NFP preview: Why we should expect a cool 250,000 print

Head of Macro Strategy / Saxo Bank

By Mads Koefoed
The first Friday of the month is almost upon us again, and with it comes that mother lode of hotly anticipated data: the US employment report, which is scheduled to hit our desks at 12:30 GMT tomorrow.

With US manufacturing in high gear, we expect another strong 
jobs report this Friday. Photo: Ingram Publishing

If consensus is to be believed, we are in for more strong US labour market figures, with a forecasted gain of 230,000 payrolls and a decline of 0.1 points in joblessness to 6.1%. As it happens, I am in full agreement with this consensus and suspect that we are in for another bullish report and a seventh straight plus-200,000 reading on nonfarm payrolls. Here's why:
  • Initial jobless claims continue to perform well, and dropped to 298,000 two weeks ago (last week's print will be available later today). Also, during the survey week for the nonfarm payrolls figure, jobless claims came in at 299,000.


  • The less volatile four-week moving average of initial jobless claims fell back below 300,000 in the last report, a number which is historically consistent with a strong gain in payrolls (as seen in the chart below).


  • The Conference Board's labour differential, which subtracts the "'jobs hard to get" index from its "jobs plentiful" counterpart, rose again in August to minus 12.4 from minus 15.3. This marks the best reading since May 2008, when it was in the midst of a sharp downtrend.


  • The ISM manufacturing report's employment index was practically unchanged and sat at a very high level of 58.1 in August (58.2 in July), which is consistent with another gain in manufacturing payrolls. In July, manufacturing payrolls gained by 28,000. Manufacturing payrolls rose by an average of 7,000 per month in 2013, but the first seven months of this year have posted a much sturdier average of 15,000 per month.


  • Markit's PMI reports on the manufacturing and services sectors were solid with the former reporting robust employment gains. Additionally, manufacturing payrolls were the strongest in more than a year. The detailed services report will be out later today.

Initial jobless claims vs. nonfarm payrolls

While we still lack a couple of interesting reports (such as ADP employment and ISM non-manufacturing), the evidence points to August being a strong month for the labour market. I am looking for the unemployment rate to decline to 6.1% (as per consensus), but also expect an above-consensus payrolls print of 250,000. The several interesting labour market-related reports out today, however, could alter those projections.

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-- Edited by Michael McKenna
Mads Koefoed is head of macro strategy at Saxo Bank
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