BOA/ML's NFP preview via eFX
NFP Preview: Employment growth likely slowed in January with nonfarm payrolls rising by 170,000.This follows a robust 2015 finish, as jobs increased by an average of 284,000 in the final three months. Exceptionally favorable weather, particularly in December, provided a boost to the data. Our models suggest that there will be some payback in the following month and an even larger payback two months later. The major snowstorm that hit the East Coast won't play a role in the January figures since it was after the survey week; it could matter for February, however.
Outside of the weather, we see reasons for some weakening in the trend given the modest uptick in jobless claims and a minor drop in the Conference Board's labor market differential.
On a sector basis, we think mining continued to shed jobs amid depreciating oil prices, and manufacturing was stagnant. Construction is particularly sensitive to weather and ramped up in 4Q, so there is a high risk of weakening. On the flip side, services sector jobs growth likely remained solid. We also look for government to rise by 5,000, which implies private sector job growth of 165,000.
We expect the unemployment rate to remain unchanged at 5.0%.Meanwhile, average hourly earnings should rise 0.3% mom with upside risk, following no gain in December. The base effects reverse between December and January. They were favorable in December, boosting the yoy rate to 2.5%, but even with a 0.3% mom increase this month, we would see deceleration to 2.2% yoy.
