March 5, 2009
Once again, it is time for the Big Daddy of all economic data releases, the Employment Report for February. The following represents market expectations;
1) Non-Farm Payrolls – Minus 648K (January -598K)
2) Unemployment Rate – 7.9% (January 7.6%)
3) Average Hourly Earnings – Plus .2 (January Plus .3)
4) Average Hourly Workweek – 33.3 hours (Unchanged from January)
Our estimates for tomorrow’s data expect job losses of 675K, unemployment rate of 8%, and hourly earnings/ hourly earnings to come in at market expectations. Our bias for a little stronger number has roots in a number of sectors, starting with manufacturing which lost 207K jobs last month. We see a push to -215K. Durable goods and nondurable goods industries will also add to last month’s print, rising to 172K and 60K respectfully. Construction employment will see little in the way of love, falling another 125K this month. We are also looking for declines in Professional and business services to the tune of 103K. We expect health care, hospitality, and financial services to wash each other out, leaving the final decline at 675K. Our bias on the financial services being part of a “wash” does however scare us a little. “Whisper” numbers, the kind that make the rounds on trading floors are talking about a print of 700K plus. That same group has also penciled in an unemployment rate of 8.1%. If any of this is true, we would be facing numbers not seen for 25 to 35 years. What others are saying;
1) HSBC – 750K with the rate at 8.0%
2) ING – 800K with the rate at 8.0%
3) Wachovia – 685K with the rate at 7.9%
4) JPM – 650K with the rate at 8.0%
5) Barclays – 675K with the rate at 8.0%
6) Nomura – 550K with the rate at 7.9%
I think it would take a print of 700K plus in job losses and 8.0% on the unemployment rate to rally bonds and improve your pricing significantly. In the event that the likes of JPM or Nomura get this right and even though it will be a sad number, it will be much better that the psychological number (whisper stuff)priced into the market. Treasuries could however take a tumble and stocks would (should) rally. We shall see.
