The US jobs report will be the focus today - BBH

Global Currency Strategy Team at  Brown Brothers Harriman & Co. (BBH) offers a preview of the keenly watched US monthly jobs report, NFP, due to be released later during the early NA session. 

Key quotes:

“It contains important economic data that is used by economists to help forecast other data over the course of the month.  However, the net new jobs the US economy is creating is somewhat less significant than earlier in the cycle.  With the focus more on price pressures, average hourly earnings are the most important part of the report, barring a significant shock.”

“That said, the 12-month moving average of non-farm payrolls is an important cyclical indicator.  It peaked three years ago (February 2015) at 261k.  In 2015 the US created an average of 226k jobs a month.  In 2016, it slipped to 187k and 171k last year.  Perhaps skewed by some weather distortions, the US created an average of 204k net new jobs a month in Q4 17.  As the cycle matures, slower job growth is inevitable.”

“The jobs report is one part of what appears to be accumulating evidence of late-cycle symptoms.  It does not mean an economic downturn this year.  It can be gradual barring a new negative shock.  On the other hand, the tax cuts may provide a late cycle boost.  Still, the late cycle aspects should not be dismissed.  The weaker than expected auto sales reported yesterday are part of this too.”

“Rising labor costs, which were seen yesterday in the Q4 unit labor costs (2.0% vs. Bloomberg survey median of 0.9%) are also taking place late in the cycle.  In January 2017, average hourly earnings to rose 0.2% for a 2.6% y/y pace.  A 0.3% rise last month would lift the y/y rate back to 2.6% from 2.5%.  The average annual pace in 2017 was 2.6% and in 2016 the average was 2.5%.”