US: Weak NFP report on the cards – Nordea

According to Nordea Markets analysts, the upcoming NFP report will prove to be interesting news, or at least there is much more at stake than what we have grown accustomed to in recent NFP reports.

Key Quotes

“Both of the employment sub-indices in the Manufacturing PMI and the Service PMI printed below 50 in the Markit Survey for the first time since 2009. If these employment PMIs have any decent prediction power on the NFP (we are far from convinced that they have), then a sub-50 reading should be seen as a hint of a negative monthly job number. If we get that, expect a big flight to quality.”

“Other indicators such as the amount of overtime hours, and the household employment survey point in the same direction, but less dramatically so. Overall, we are betting that we are going to see firmer evidence that employment is slowing next Friday. Risks are (clearly) on the downside of consensus expectations.”

“The ISM Manufacturing (Tuesday) index is trickier to judge. Regional surveys continue to paint a better picture than the ISM (on average), but forward-looking gauges such as lagged interest rates are hinting that the bottom is not yet in. Our weighted 2+10yr bond yield indicator hints of a bottom in ISM Manufacturing in March/April 2020. Lower, before higher. Consensus expects a rebound back to >50 territory.”