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NFP Preview - Job Growth Likely to Meet Consensus

Last updated 1/5/2012 11:10 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

US equities and risk currencies remained under pressure in opening North American trade today despite the fact that US economic data was generally positive as concerns over European debt trumped the better than forecast US numbers. High beta FX remained near the session lows with EUR/USD breaking below the 1.2800 barrier while cable took out the 1.5500 figure as US equities remained in the red with DJIA off by more -80.00 points.

However, despite the dour investor sentiment the latest economic data confirms that  US labor markets are clearly improving suggesting that tomorrow's NFP report is likely to beat market expectations of 150K jobs although it may come up short of the most bullish estimates of 200K jobs or more. Seven out of eight key metrics that we track in anticipation of the NFP number have printed better than forecast including today ADP report which registered a gain of 325K versus 175K eyed.  The latest round of US economic data also showed improvement in Consumer confidence to 67.7 from 65.6 projected, ISM Manufacturing employment which printed at 55.1 versus 51.8 and decline in the four week moving average of jobless claims to 371k from 378K forecast.

Overall, US economic data clearly shows an expansionary labor market providing ample support for tomorrow's consensus call of 150K   new jobs. However, perhaps the most important predictor of NFP results - the employment sub component of ISM Services which comprises 70% of the US economy - is showing much more modest gains in job growth. The employment sub component  of ISM Non Manufacturing increased by only 0.5 points to 49.4 from 48.9 remaining below the key 50 boom/bust line. The relatively tepid growth in service sector jobs indicates that tomorrow's NFPs are unlikely to exceed the 200K barrier and will therefore suggest that the US economy continues to recover but at a distinctly moderate pace.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.