What to Look for in Friday’s Unemployment and Payrolls Report

If there is one economic report that hits the heart of America, it is the monthly Employment Situation Report from the Bureau of Labor Statistics (BLS). This report is released on the first Friday of each month. That puts all eyes on this coming Friday.

Investors will first want to look backward in December before looking at the fresh number and expectations. December’s unemployment remained flat at 5.0%. Nonfarm payrolls grew by a sharp 292,000, and private sector payrolls were also strong at 275,000. Average hourly earnings were flat and the average workweek was 34.5 hours.

Bloomberg has the Econoday estimates pegged for this Friday, for the month of January, coming in at a mere 188,000 in nonfarm payrolls and 180,000 in total private sector payrolls. Econoday’s highest estimates so far are 215,000 in nonfarm payrolls and 206,000 in private sector payrolls.

What is expected to stand out in Friday’s report is that average hourly earnings are expected to rise by 0.3% ($25.24). That matters right now because the Federal Reserve is looking for any and every data point that it can find that helps in its campaign to raise interest rates. Inflation is tame due to oil, so the Fed is looking elsewhere.

Dow Jones is calling for unemployment to remain flat at 5.0% as well. Dow Jones has a slightly different view of payrolls, with its consensus estimate at 185,000 in nonfarm payrolls.
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Another interesting read will take place in the labor force participation rate, which was last seen a tad higher at 62.6%. This number remains historically very low.

There will be a few other economic reports that could skew the unemployment and payrolls expectations.

On Thursday we get weekly jobless claims (also from the BLS), and those are expected to be 280,000 (versus 278,000 prior week). What stands out here is that the weekly claims had been rising in prior weeks and were getting very close to the 300,000 barrier again.

On Wednesday we will get to see the ADP payrolls report, and the Bloomberg consensus (also same from Dow Jones) is 190,000 for January, versus 257,000 in December.