Welcome to another edition of non-farm Friday with a side of Canadian bacon.
There's some main street anxiety about a negative number and with omicron raging in the US in January, that's warranted. The consensus is +150K but estimates range from +385K to -400K.
Here's the forecast from Goldman Sachs:
"We estimate nonfarm payrolls declined by 250k, 400k below consensus of +150k. Our forecast reflects a large and temporary drag from Omicron on the order of 500-1000k, as survey data indicate a surge in absenteeism during the month."
I don't see many market risks around this report. A soft data point will put downward pressure on yields on relief about the path of Fed hikes. An upward surprise will demonstrate some economic strength but unless it's +800K or something of that nature then it's not going to spur the Fed to be more aggressive.
Watch out for an upside surprise on average hourly earnings if there's a soft headline jobs number because job losses of low-wage workers will bias wage growth higher. That could ultimately be what moves the market and it's my lone negative scenario to watch out for.
Also note some seasonal adjustments to the household survey. This is from Westpac:
With activity in service sectors infected by Omicron in January, causing jobless claims to rise, hiring likely slowed to a 102K pace. Given the difficulties employers have faced recruiting workers following previous Covid waves, it’s likely that many would have been reluctant to let employees go during what looks to be a shortlived Covid wave. Most of the impact from Omicron will be on display in a reduction in hours worked in sectors that experienced tighter restrictions and consumer caution, along with worker absenteeism related to infections. As a result, the unemployment rate likely ticked up to 4.0%, while wage growth could have remained hot at 0.5% as job gains were tilted towards higher-paying sectors. Traders should be cautious when interpreting the household survey’s change in employment as the BLS will be introducing new population controls derived from the 2020 Census which won’t be incorporated into the historical data and can therefore bias the employment gain up or down.
Note that Canadian employment is also due. The consensus is -117.5K after a +54.7K reading prior. Canada had strict omicron controls throughout January and that makes for a downside risk but I'd be a buyer on any loonie weakness with oil at $92.
