US jobless rate likely to decline in February on falls in weekly jobless claims

US February nonfarm payrolls are likely to have grown by 200k. Private payrolls are expected to have increased by 190k, while government payrolls are likely to have expanded by 10k in February. Average hourly wage growth is expected to have moderately grown by 0.1% m/m and 2.5% y/y, ager the sharp increase of 0.5% m/m in January. The jobless rate is expected to have fallen by one-tenth to 4.8%, while average workweek to have remained steady at 34.6 hours.

The strong job growth expectation for February is based on high frequency indicators of labor market activity, such as jobless claims print. In the past two weeks, initial claims for unemployment insurance have declined after a series of higher readings from late December through January. In the reference week for the February employment report, initial jobless claims declined 32k in the same period in January to 262k. The temporary increase in initial claims was mainly due to agricultural employment.

The weakness seen in the January establishment survey is not because of a decline in the US labor markets. The February report is expected to show a rebound in the declines seen in couriers and messengers, educational services and temporary help services employment in January. The rise in financial stress might confirm a brief headwind to hiring.

"Overall, we look for these factors to result in payroll growth returning to a healthy trend of 200k", says Barclays.