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NFP Day: Consensus 210,000 (watch for Outliers)

We get the February payrolls data in about an hour — the consensus estimates of 210,000 net new jobs follows last January’s 243,000. The range is of 125,000 to 275,000.

Bloomberg notes that another 200k+ job number would “cap the strongest six-month hiring stretch since 2006.”

If we get a consensus number (190k-230k), the factors to watch for are 1) revisions; 2) temporary hires; 3) hours worked;  and given the Fed concerns about inflation, 4) wages paid.

The more interesting variant is what happens if we get either a big upside or downside surprise.

A big miss means the recession camp gets new life breathed into it. After last month’s data, I downgraded my recession probability over the next 12 months from 50-60% to 40-50%. That is still higher than the street, but there is compelling data-based reasons to be concerned about another slow down. The NFP trend over the past year certainly has not been one of them.

An upside surprise is also a fascinating wrinkle, with three significant responses:

1) The usual conspiracy doofuses will don their dunce caps and scream “fix.” Follwo Caroline Baum’s advice and ignore their money losing silliness.

2) Politically, every strong NFP makes the incumbent that much harder to beat. If we get another very strong number (+225k), expect to see one or two GOP challengers drop out of the race.

3) Monetary policy is primarily concerned with Employment and Inflation. A big upside means the former is improving and the latter is becoming a greater concern.

Ignoring the Dumb and Dumber of 1 & 2, what we really need to watch is 3 — the only one that matters to investors.

The Fed could take a strong number as an excuse to begin removing the extraordinary accommodations they have in place. At the very least, the jawboning would get ratcheted up quite a bit.And the inflationistas would similarly pound their war drums even louder.


Read more: The Big Picture