What is the distribution of forecasts for the US NFP?

The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

Non-Farm Payrolls

• 19K-155K range of estimates
• 40K-75K range most clustered
• 60K-70K consensus

Unemployment Rate

• 4.7% (2%)
• 4.6% (30%)
• 4.5% (58%) – consensus
• 4.4% (8%)
• 4.3% (2%)

Average Hourly Earnings Y/Y

• 3.7% (14%)
• 3.6% (67%) – consensus
• 3.5% (10%)
• 3.4% (10%)

Average Hourly Earnings M/M

• 0.4% (7%)
• 0.3% (70%) – consensus
• 0.2% (18%)
• 0.1% (5%)

Average Weekly Hours

• 34.3 (74%) – consensus
• 34.2 (26%)

The December jobs data so far has been good as Adam noted in his post here. As noted by Fed Chair Powell and other Fed members, the unemployment rate should be the most important indicator at the moment, although a notable deviation in the headline payrolls won’t be ignored.

Looking at the distribution of forecasts, we can notice that the expectations are skewed to the upside for the unemployment rate. So, a 4.4% rate or lower will be taken as a hawkish surprise, while we need a 4.7% rate or higher for a dovish surprise.

Having said that, I have a feeling that CPI will be more important because inflation worry is what is constraining the Fed from acting more quickly and with more conviction on rate cuts. Nonetheless, notable deviations in the NFP report will still trigger big market moves and influence the market pricing.

This article was written by Giuseppe Dellamotta at investinglive.com.