Nonfarm Payrolls Preview: Dollar Booster? Three Expectation Downers Pave Way For Upside Surprise

100 million doses in 100 days – President Joe Biden’s pledge has proved to be a low bar too easy to cross, and that may also be the case for February’s Nonfarm Payrolls. If the bar is indeed low, it would be easy to surpass and a trigger for dollar gains.

Why are estimates low? 

Three reasons for low estimates

1) Focus on weak employment

Ten million Americans are unemployed – that has been the focus for Federal Reserve officials, over and over again. They see through the fall of the Unemployment Rate to 6.3% and eye the jobs lost that need to be restored.

By stressing the dire situation, the Fed is contributing to lowering expectations. Officials receive the NFP figures in advance and tend to stay mum, but investors may interpret caution from speakers as a hint that data will be weak.

2) Weak leading indicators

ADP’s private-sector labor report missed estimates with an increase of only 117,000 jobs gained last month. While the correlation between the official figures and the payroll firm’s numbers was weak after the pandemic erupted, it has been improving in recent months. As most Americans work in the private sector, that is a worrying sign.

Secondly, the US is a developed economy that leans towards the services sector – and figures were disappointing there as well. The ISM Purchasing Managers’ Index for the sector missed estimates with 55.3 points, and the employment component also slowed down. While the ISM Manufacturing PMI beat estimates, data leading to Friday’s report leans lower.

(Click on image to enlarge)

Source: FXStreet 

3) A trio of misses

Economists have been too optimistic on Nonfarm Payrolls figures in the past three months, including December’s loss of jobs. As the NFP is notoriously hard to estimate, perhaps those surveyed will now err on the side of caution and are lowering their initial forecasts, resulting in 182,000 seen on the calendar.

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