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Jobs on deck — What you need to know in markets on Friday

Myles Udland
Markets Reporter

Friday is jobs day in America.

At 8:30 a.m. ET, the BLS will release the jobs report for the month of February.

Markets expect this report to cement a rate hike from the Federal Reserve next week, which rates markets have all but priced in over the last two weeks.

According to Bloomberg, here’s a snapshot of what economists are forecasting for Friday:

  • Nonfarm payrolls: +200,000
  • Unemployment rate: 4.7%
  • Average hourly earnings, month-on-month: +0.3%
  • Average hourly earnings, year-on-year: +2.8%
  • Average weekly hours worked: 34.4

Earlier this week, data provider ADP reported that in February, 298,000 jobs were created in the private sector, far exceeding expectations. This was attributed, in part, to an unseasonably mild winter, which helped to boost construction employment.

But this robust gain in payrolls also speaks to the broader economic confidence we’ve seen among businesses and consumers since Donald Trump election win.

As we noted at the beginning of the week, we expect a relatively robust employment report for a couple of reasons,” writes Deutsche Bank economist Joe LaVorgna.

“One, we have noticed a recent tendency for February employment to outperform consensus forecasts. In fact, over the past five years, the initially-reported headline February payroll gain has exceeded the consensus forecast by an average of 47,000… Two, we expect a modest rebound in government hiring, which has declined for the last four consecutive months by an average of -10,000. This weakness has primarily been concentrated at the state and local level. Hence, despite the Federal government hiring freeze ordered by President Trump, we still expect to see a modest rebound in overall government payrolls.”

LaVorgna is calling for job gains of 200,000 and a drop in the unemployment rate to 4.7%.

Economists at Goldman Sachs, who are calling for nonfarm payrolls to grow by 215,000 in February, see favorable weather, a strong ADP report, and further drops in initial jobless claims as arguing for a better-than-expected report.

Additionally, history says that seasonal adjustments in the February report augur for a strong report. “Since 2010, February payroll growth has surprised positively relative to consensus in six of the seven instances, with an average surprise of +36,000,” Goldman writes. “This may suggest some additional upside risk to the extent the BLS seasonal factors have not fully evolved to reflect this tendency.”

But this report is really about the Fed.

Data from CME Group showed that as of Thursday, traders were assigning a 91% probability to a rate hike from the Fed next week. A major downward surprise in Friday’s number could change this outlook, but given the sentiment increase we’ve seen recently in the economy and the change in tone from major Fed officials recently, this seems like a very outside possibility.

“We very much doubt the FOMC will be into the awkward position of having to dismiss a soft February jobs report,” writes Ian Shepherdson, an economist at Pantheon Macroeconomics. “We expect a broad-based 250,000 headline number, assuming normal seasonals and an on-trend contribution from the birth/death model.”

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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