Date: 03 Aug 2018

Traders may have already noted there’s not much difference between the consensus forecasts of a 192,000 increase for today’s US non-farm payroll figure for July, in a poll of economists polled by Bloomberg, and the 190,000 consensus forecast made in a poll of economists by Reuters. Traders will also recall that the June NFP figure was a rise of 213,000. Intriguingly though, Wednesday’s US ADP data showed domestic private employers adding 219,000 workers in July, in contrast to the 185,000 that had been forecast by analysts polled by Reuters. As references to both the Bloomberg and Reuters polls can be seen online ahead of the ADP release, those forecasts of around a 190,000 rise cannot have taken into account the above forecast ADP print. Admittedly, ADP data hasn’t been the greatest indicator of the NFP figure in recent months but, taking it at face value, traders might consider there’s a risk that, as they stand, the consensus NFP forecasts may be underestimating the actual July number. In that vein, writing on July 26, well ahead of the ADP print, Bank of America Merrill Lynch (BAML) analysts wrote of their expectation for “non-farm payrolls to increase by 225k in July following an increase of 213k in June.” Of course outlier individual forecasts aren’t unusual but traders might be interested to know that BAML wrote that its “forecast is supported by [their] private payrolls tracker based on internal BAC data which advanced 236k in July,” and that “the tracker has given a fairly accurate read on employment growth as reported by the Bureau of Labor Statistics (BLS) in recent months, registering a mean absolute error of 17k in the last three months and capturing the upside surprise relative to consensus in the last two months.”

by Neal Kimberley, External Currency Analyst.