Article / 04 April 2014 at 8:00 GMT

Non-farm payrolls preview: Reverse-weather impact to boost gains

Head of Macro Strategy / Saxo Bank
Denmark

• Reverse weather impact to boost NFP additions
• Bloomberg consensus for 200,000
• Bullish 225,000 could be on the cards

By Mads Koefoed

Bottom line: The US labour market woke up from its winter hiatus in March to such an extent that Non-farm payrolls are expected to have risen by 225,000. The unemployment rate has likely declined to 6.6 percent.

US employment

Details: The US labour market surprised to the upside in February with a net increase of payrolls of 175,000 (149,000 expected) following a couple of unsatisfactory months in December and January where payrolls only rose 84,000 and 129,000 respectively. As surprisingly positive as February may have been, it is the March report which will confirm the impression that spring has arrived.

Initial jobless claims

Labour market data mixed: Initial jobless claims declined to 320,000 in March from 324,000 in February while claims for the actual Non-farm payrolls survey week dropped to 323,000 from 330,000 in the same week a month earlier. The ADP employment report also showed robust growth (in the private sector) of 191,000. Less inspiring were the two ISM reports, which printed 51.1 and 53.6 for the manufacturing and service sectors respectively though they still show expansion. Challenger job cuts dropped 30.2 percent year-on-year in March, according to a report yesterday, and the labour differential* was largely unchanged at minus 19.9 in March vs. minus 19 a month earlier, both of which represent improvement on the numbers in the recent six months.

ADP employment

Weather impact to turn positive: The colder-than-usual weather in the winter months left a clear mark on the labour market though February payrolls actually turned out to be quite robust, rising 175,000. I expect the 'weather effect' to reverse in the March employment report and provide an additional boost to payrolls. However, March itself was also quite cold, so the weather effect will only partly affect March and will also stretch into April as well.

Hours worked is traditionally impacted more by adverse weather and the weekly average declined to just 34.2 in February having stayed in the 34.4 to 34.5 range from September 2011 to November 2013. I expect a comeback to hours worked in March and April.

Overall, I view labour-related data as supportive of a payrolls gain of 200,000 in March, but judgmentally add 25,000 due to bad weather in previous months for a total of 225,000. I expect the unemployment rate to revert to 6.6 percent following the 0.1 percentage point uptick in February. Bloomberg's consensus is for a gain of 200,000 and an unemployment rate of 6.6 percent.

* The labour differential measures the difference between those surveyees saying that jobs are plentiful and those saying jobs are hard to get in the Conference Board's consumer confidence report. 

Non-farm payrolls competition: It's that time of month again. You've seen Mads' prediction. Do you think you could do better? Write your guess for March's NFP in the comment section below. 

Mads Koefoed is Saxo Bank's Head of Macro Strategy. Read more of Mads' analysis on our online copy trading platform.

04 April
Mads Koefoed Mads Koefoed
Please go to TradingFloor4 and participate in the Nonfarm Payrolls competition:
https://beta.tradingfloor.com/posts/non-farm-payrolls-preview-reverse-weather-impact-boost-gains-264335028
04 April
Mads Koefoed Mads Koefoed
I'll kick proceedings off with a +225k prediction as indicated in the preview...
04 April
Peter Garnry Peter Garnry
+241K...I was bearish last time, now it is time to be bullish
04 April
John J Hardy John J Hardy
I will go even more aggressive: +282k
04 April
Martin O'Rourke Martin O'Rourke
225,000? Not high enough! I'm going to go for 237,000
04 April
Ole Hansen Ole Hansen
207k it is....
04 April
Dr Chris Dr Chris
215K
04 April
George1 George1
187
04 April
marcovitz marcovitz
180k
04 April
GPAR GPAR
+268k
04 April
Dimitrios Tamvakas Dimitrios Tamvakas
185k
04 April
John J Hardy John J Hardy
+282k
04 April
Mads Koefoed Mads Koefoed
The first ten estimates are in... and the bar has been set high with a median estimate of 220k compared with a Bloomberg survey median of 200k.
04 April
smacksman smacksman
216k - better but no cigar yet
04 April
nb86 nb86
+235000
04 April
benlouro benlouro
266K
04 April
WP Invest WP Invest
233k +/- 20k :) :) :)
04 April
Doc' Doc'
265k
04 April
Cwealth Cwealth
+228K
04 April
tyco tyco
+178K
04 April
fezso98 fezso98
199k
04 April
bvlaerhoven bvlaerhoven
202k
04 April
Felicity A Glover Felicity A Glover
178K
04 April
Margarida Santo Margarida Santo
231,000
04 April
Michael O'Neill Michael O'Neill
189K
04 April
vgiaritz vgiaritz
242k
04 April
Clive Lambert - FuturesTechs Clive Lambert - FuturesTechs
OK. A quick Google search and I found this site: http://www.random.org/ It gave me my answer: 105K
04 April
Paul168 Paul168
254k
04 April
Mads Koefoed Mads Koefoed
Keep them coming...
We now have 25 estimates with a median of 225k.
04 April
vyacheslav111 vyacheslav111
116k
04 April
iMemon iMemon
170K
04 April
Owen Thomas Owen  Thomas
289k
04 April
Clare MacCarthy Clare MacCarthy
234,000
04 April
farmersuez farmersuez
190k.
04 April
fxtime fxtime
232k I was going to do the same as Clare !!
04 April
Juhani Huopainen Juhani Huopainen
228K
04 April
cnmcmurray cnmcmurray
222K
04 April
Mads Koefoed Mads Koefoed
With 1½ hours to go we have 33 estimates and the median is still 225k. We have a high of 289k and a low of 105k.
04 April
Anthony Marks Anthony Marks
190k w last month revised up 35k
04 April
Humphrey Humphrey
223k
04 April
JonasP JonasP
187
04 April
Maria T Salgado Maria T Salgado
145K
04 April
Franksg Franksg
98000
04 April
Mads Koefoed Mads Koefoed
The competition closes in 25 min (GMT 12:25) and the employment report is released five minutes later (12:30). Currently we have 37 estimates with a median of 222k.
04 April
Augustin Doittau Augustin Doittau
196k
04 April
Michael Kirk Michael Kirk
150K
04 April
jace jace
+ 162 K
04 April
Teis Knuthsen Teis Knuthsen
302K
04 April
keekko keekko
275k
04 April
Mads Koefoed Mads Koefoed
The competition has closed.

www.TradingFloor.com has 42 estimates with a median of 219k, a high of 302k and a low of 42k. The Bloomberg survey has a median of 200k, a low of 92k and a high of 275k. Number to be reported in five minutes!
04 April
Mads Koefoed Mads Koefoed
The competition has closed.

www.TradingFloor.com has 42 estimates with a median of 219k, a high of 302k and a low of 42k. The Bloomberg survey has a median of 200k, a low of 92k and a high of 275k. Number to be reported in five minutes!
04 April
Mads Koefoed Mads Koefoed
It looks like farmersuez is the winner with a prediction of 190k, just 2k shy of the actual figure 192k.
04 April
Mads Koefoed Mads Koefoed
Anthony Marks also predicted 190k but farmersuez was the first one to predict 190k...
04 April
Anthony Marks Anthony Marks
Hi Mads

Anthony Marks here, did I win?

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