NFP expected to fall by 100000 in January

On Friday 4 February, the US official employment report will be released. Market consensus is for an increase in payrolls of 155K while Wells Fargo expects a decline by 100K. They anticipate average hourly earnings to rise by 0.6% during January.

Key Quotes:
“In recent months, there have been substantial revisions to the payroll data each month, and January will bring annual benchmark revisions to the payroll survey, shedding additional light on the underlying trend in hiring. Looking ahead, the Omicron wave looks to have slowed hiring markedly in the first month of 2022.”

“Aside from causing a surge in worker absenteeism due to illness, the hiring process was likely significantly derailed by the wave of new infections, which reached a peak during the survey week. On the other hand, employers’ reluctance to part ways with seasonal workers amid increasingly dire shortages of labor might help offset the drag from the sharp acceleration in case counts.”

“All together, we stand apart from the consensus view of a modest gain and expect payrolls to decline by 100,000 in January. We look for the unemployment rate to hold steady at 3.9%, although we note that new population controls for the household survey will be released with January’s report, which could add extra noise to the household numbers.