US NFP Preview:
- Consensus forecasts are looking for jobs growth of +150K while the unemployment rate (U3) is anticipated to hold at 3.9%.
- However, a contraction in the January US ADP employment report and rising US jobless claims through January – thanks to the COVID-19 omicron variant surge – raise the possibility that the headlines NFP figure could print negative.
- Will a weak January US jobs report accelerate the US Dollar sell-off, or change Fed rate hike expectations? We’ll discuss these questions and more in context of the January US nonfarm payrolls report starting at 8:15 EST/13:15 GMT. You can join live by watching the stream at the top of this note.
Negative NFP Can’t Be Ruled Out
According to a Bloomberg News survey, forecasters are looking for jobs growth of +150K while the unemployment rate (U3) is anticipated to hold at an impressive 3.9%. Meanwhile, the US labor force participation rate is due to stay on hold at a still-meager 61.9%. Wage growth is expected to remain robust, at +5.2% y/y in January from +4.7% y/y in December.
But the spread of the COVID-19 omicron variant appears to have weighed on the US labor market. Notably, US jobless claims have ticked higher every week through January, and alongside declining PMI readings, a weaker US jobs reading is expected. Moreover, the January ADP employment change report showed a contraction of -301K private sector jobs. The risks are titled to the downside, potentially sparking another leg lower for the already-weak US Dollar.
Atlanta Fed Jobs Growth Calculator (January 2022) (Chart 1)
The US economy continues to inch closer towards achieving ‘full employment’ as experienced pre-pandemic. According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +424K jobs growth per month over the next 12-months in order to return to the pre-pandemic US labor market of a 3.5% unemployment rate (U3) with a 63.4% labor force participation rate.
Will a weak January US jobs report accelerate the US Dollar sell-off, or change Fed rate hike expectations?
We’ll discuss these questions and more in context of the January US nonfarm payrolls report starting at 8:15 EST/13:15 GMT. You can join live by watching the stream at the top of this note.
--- Written by Christopher Vecchio, CFA, Senior Strategist
