Feb 6, 2020

Tomorrow, we get the big one, the most (in my opinion) significant economic report of all: the jobs report. So, what should we expect?

Job growth may beat expectations

Recent reports have been lumpy, but most economists expect good news from tomorrow’s report. At the end of last year, job growth dropped from 193,000 in September to 152,000 in October (on the GM strike), only to reverse up to 256,000 in November when the GM workers returned. December showed growth of 145,000, which was not bad but down from previous months after accounting for the GM strike. The real question is whether job growth will pick back up above that level.

Economists think it will, with an average number of 160,000 for January. This result would be well up on December, although below the six-month average of 190,000. If job growth comes in at that level, it would still indicate a slowdown over the end of last year.

Chances are, however, that we will see more jobs created than expected. The recent ADP jobs report jumped from 199,000 to 291,000 in December—suggesting a surge in hiring. Jobless claims have been dropping, as have announcements of job cuts. Surveys of business confidence have also indicated faster hiring. Finally, hiring for the decennial Census started last month, which should help the numbers. Overall, a result in line with the six-month average, around 180,000–190,000, seems very probable.

Slowdown passing?

If we do get that number, it will be one more piece of evidence that the slowdown at the end of last year may be passing. The other job numbers, if they come in as anticipated, would also support that idea. Unemployment, for example, is expected to stay at the current 3.5 percent, a very low level. The average hours worked per week should tick up, another positive sign. Finally, monthly wage growth is anticipated to rise back to 0.3 percent, another positive.

On balance, if the report comes in as expected, it will be good news for the economy and markets, as it will indicate continued growth after a slowdown last year. If it comes in better than expected? The news will be even more positive, as it will be a sign that growth is picking up again.

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