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A Year of Improving Payroll Growth Starts Tomorrow


The all-important February jobs report is due out this Friday morning and my favorite - and most bullish - prognosticator is expecting big things.

Officially, consensus is for 165,000 new jobs being added for February, but Andrew Wilkinson, chief economic strategist at Miller, Tabak & Co. thinks it will be much higher, and that an uptrend that began late last fall looks set to continue.

"The [ADP] revision to 215,000 (for January) means the government data stands a good chance of upward revision too," he says in the attached video. That said, he's keeping his guard up as worries about the weather, the impacts of higher payroll taxes and the uncertainty in Washington all should be factored in when assessing the number that will be released Friday by the Labor Department at 8:30a Washington time.

Another reason for Wilkinson's relative bullishness versus that of his peers, is the modest but steady decrease in the weekly initial claims data. "It is key when initial claims fall below 350,000. That's when job creation really begins," Wilkinson says, noting that the number has steadily fallen over the past few months and is now at 355,000, with continuing claims at levels not seen in five years.

His broader belief is that this will be a year of improving jobs data that tops overly pessimistic estimates. While that predicted string of positive surprises is fueling the stock markets already, there is some risk if expectations were to suddenly firm up.

"If we get three, back-to-back, improvements beyond 200,000, I think people will start to question the Fed's validity of acting within the bond markets."

While the Fed has repeatedly set its own inflation and jobs targets, even theoretical discussions about ending its program of quantitative easing have been poorly received by investors. It's a scenario he described this way in a note to clients today.

"When sub-par expectations catch up to signs of improving (economic) health, investors are disappointed faster, causing stocks to lose momentum."

But for the time being, he concludes, "pessimism is sand-bagging investor sentiment", and it appears to be working just fine.