US Employment Report Preview

Today's main event is the US Employment Report (14:30 CET), featuring the nonfarm payrolls and the unemployment rate. While the previous report showed substantial upward revisions to employment growth, it also revealed a slowdown to 257K in January from 423K in November. The consensus expectation is a further deceleration in employment growth to 235K in February. 

The FOMC sees a 200K+ figure as a healthy pace of employment growth, but it is also willing to tolerate a figure between 150K and 200K, as long as various measures of unemployment continue their decline during the course of the year.

Rabo Bank notes in a report on Friday:

• Our own econometric model, which takes into account the other labor market data for February that have been published earlier, is slightly below consensus with a 228K forecast. In addition, our model forecasts a downward revision to the January figure.
• Payrolls are notoriously difficult to predict. Nonfarm payroll growth has been stronger than suggested by other labor market data, which does suggest some downside risk to the consensus expectation.
  
  
• The underemployment rate (U6) includes marginally attached workers and part-time workers for economic reasons. 
  
  
• According to our calculations, if the FOMC were to have an implicit target for U6 it would probably be around 9.0-9.3%. In January, the underemployment rate stood at 11.3%, which suggests that there is still substantial slack in the labor market.