As per usual, the three main components will be the headline non-farm payrolls number, the unemployment rate, and average hourly earnings. And typically, we will also get the two-month revision to the payrolls figure. However, this time around will feature the annual adjustments from the benchmark revision
up to March 2025.
On the latter component, a large negative revision is already well expected. But still, it doesn’t mean that markets will not react negatively to the release. It needs to be put into context alongside the other components too. If the overall report is a softer one, this will just compound the impact it will have on markets.
The expected revision is for something along the lines of 800k, or perhaps a little more than that. Fed governor Waller already warned of the negative labour market picture as implied by what this revision will entail:
“Compared to the prior
ten-year average of about 1.9 million jobs created per year, payrolls increased just under 600,000 for 2025. And,
last year’s data will be revised downward soon to likely show that there was virtually no growth in payroll
employment in 2025… This does not remotely look like a healthy labour market.”
And this is what analysts are estimating for the figure (reminder that the preliminary estimate is 911k):
Besides that, there is also going to be an adjustment or should I say update to the birth-death model starting from April 2025 onwards with seasonal adjustment factors for the past five years. Why is this important?
For the uninitiated, the birth-death model isn’t what the name implies. It basically is a statistical model used to estimate job creation from new businesses (births) and losses from business closures (deaths).
The BLS will now amend the model and the methodology used to incorporate sample-based information each month. In essence, it will make real-time monthly data more sensitive to actual employment developments.
At the balance, most analysts are expecting this to have a meaningful downwards revision to monthly jobs. Barclays outlines the reason for that being “the
models had overshot true birth-death effects over the remainder of the 2025 benchmark period”.
As for the overall labour market report itself, let’s see what key analysts have to say based on their calls.
Goldman Sachs
– NFP growth of 45k, unemployment rate of 4.4%
– “We estimate that the birth-death model – which will be updated with this report—could
contribute 30-50k fewer jobs to payroll growth on a seasonally adjusted basis than in recent months”
– Jobless rate has risks skewed to the downside as “the bar for
rounding down to 4.3% is not high from an unrounded 4.38% in December and the January unemployment
rate appears to suffer from modestly negative residual seasonality”
– “Cumulative payroll growth between April 2024 and Mar 2025 likely 750-900k lower than shown
in existing payrolls data”
Citi
– NFP growth of 135k, unemployment rate of 4.4%
– “January employment data is unlikely to materially change the outlook for the labour market after a drop in
the unemployment rate in December alleviated some concerns over a further weakening in employment”
– “We would caution that seemingly stronger January job growth may heavily reflect issues with seasonal
adjustment that have boosted January employment figures in the past”
– “Benchmark revisions released with January figures should also show much lower employment in 2025,
likely by around 700k, complicating the market reaction to the data”
– “Overall, we do not expect that January employment data will significantly change our view that the labor
market will continue to gradually weaken, even if this weakening is not consistent each month and more
likely to appear into the spring and summer”
BofA
– NFP growth of 45k, unemployment rate of 4.4%
– “The weaker jobs forecast reflects expected downward revisions tied to the updated Birth-Death model”
– “Also, Apr ’25 onwards, we think the updated firm Birth-Death model will lead to a 20
30k downward revision to monthly jobs”
– “We estimate payrolls as of Mar ’25 will be revised down by 800k-850k (65k
70k/month), still historically large but slightly smaller than the preliminary estimate of -911k”
– “If the downward revisions are modest and concentrated in 2H24, they should be less concerning for the
Fed because policymakers are more focused on the recent outlook. The Fed has already been penciling in
a 60k/month downward revision”
– “Hence, this would further reinforce the Fed’s optimism about the labor
market”
JP Morgan
– NFP growth of 75k, unemployment rate of 4.4%
– “In recent January reports, the November and December change has tended to get revised up, so the trend
could soon look stronger”
– “There is also a slight tendency for January to print above the trend that was
known at the time of the release”
– “Employment growth from March 2024 to March 2025 should be revised down by
about 800k, with the lower growth evenly spread across the 12 months”
– “While we expect the unemployment rate will continue to round to 4.4%, it could move from a
low-side to a high-side reading, setting up a rise to 4.5% by February”
(h/t @ MNI Markets)
